[Senate Hearing 115-736]
[From the U.S. Government Publishing Office]


                                                   S. Hrg. 115-736

                           REAUTHORIZING THE
                         HIGHER EDUCATION ACT:
                           ACCOUNTABILITY AND
                           RISK TO TAXPAYERS

=======================================================================

                                HEARING

                                 OF THE

                    COMMITTEE ON HEALTH, EDUCATION,
                          LABOR, AND PENSIONS

                          UNITED STATES SENATE

                     ONE HUNDRED FIFTEENTH CONGRESS

                             SECOND SESSION

                                   ON

     EXAMINING REAUTHORIZING THE HIGHER EDUCATION ACT, FOCUSING ON 
                  ACCOUNTABILITY AND RISK TO TAXPAYERS

                               __________

                            JANUARY 30, 2018

                               __________

 Printed for the use of the Committee on Health, Education, Labor, and 
                                Pensions


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          COMMITTEE ON HEALTH, EDUCATION, LABOR, AND PENSIONS

                  LAMAR ALEXANDER, Tennessee, Chairman

MICHAEL B. ENZI, Wyoming		PATTY MURRAY, Washington
RICHARD BURR, North Carolina		BERNARD SANDERS (I), Vermont
JOHNNY ISAKSON, Georgia			ROBERT P. CASEY, JR., Pennsylvania
RAND PAUL, Kentucky			MICHAEL F. BENNET, Colorado
SUSAN M. COLLINS, Maine			TAMMY BALDWIN, Wisconsin
BILL CASSIDY, M.D., Louisiana		CHRISTOPHER S. MURPHY, Connecticut
TODD YOUNG, Indiana			ELIZABETH WARREN, Massachusetts
ORRIN G. HATCH, Utah			TIM KAINE, Virginia
PAT ROBERTS, Kansas			MAGGIE HASSAN, New Hampshire
LISA MURKOWSKI, Alaska			TINA SMITH, Minnesota
TIM SCOTT, South Carolina		DOUG JONES, Alabama           


               David P. Cleary, Republican Staff Director
         Lindsey Ward Seidman, Republican Deputy Staff Director
                 Evan Schatz, Democratic Staff Director
             John Righter, Democratic Deputy Staff Director
                            
                            
                            C O N T E N T S

                              ----------                              

                               STATEMENTS

                       TUESDAY, JANUARY 30, 2018

                                                                   Page

                           Committee Members

Alexander, Hon. Lamar, Chairman, Committee on Health, Education, 
  Labor, and Pensions, Opening Statement.........................     1
Murray, Hon. Patty, Ranking Member, a U.S. Senator from the State 
  of Washington, Opening Statement...............................     4

                               Witnesses

Carnevale, Anthony P., Ph.D., Research Professor and Director, 
  Georgetown University Center on Education and the Workforce, 
  Washington, DC.................................................     8
    Prepared Statement...........................................     9
    Summary Statement............................................    12
Voight, Mamie, Vice President of Policy Research, Institute for 
  Higher Education Policy, Washington, DC........................    13
    Prepared Statement...........................................    15
    Summary Statement............................................    24
Cruz, Jose Luis, Ph.D., President, Herbert H. Lehman College, 
  City University of New York, Bronx, NY.........................    25
    Prepared Statement...........................................    27
    Summary Statement............................................    33
Delisle, Jason D., Resident Fellow, American Enterprise 
  Institute, Washington, DC......................................    34
    Prepared Statement...........................................    35
    Summary Statement............................................    43
Miller, Ben, Senior Director, Postsecondary Education, Center for 
  American Progress, Washington, DC..............................    43
    Prepared Statement...........................................    45
    Summary Statement............................................    53

                          ADDITIONAL MATERIAL

Statements, articles, publications, letters, etc.

Murray, Hon. Patty:
    Senator Dick Durbin Statement for the Record.................    61
Kaine, Hon. Tim:
    National organizations representing the Nation's military 
      servicemembers, veterans, survivors, and military families, 
      prepared statement.........................................    75

 
                           REAUTHORIZING THE
                         HIGHER EDUCATION ACT:
                           ACCOUNTABILITY AND
                           RISK TO TAXPAYERS

                              ----------                              


                       Tuesday, January 30, 2018

                                       U.S. Senate,
       Committee on Health, Education, Labor, and Pensions,
                                                    Washington, DC.
    The Committee met, pursuant to notice, at 10:14 a.m., in 
room 430, Dirksen Senate Office Building, Hon. Lamar Alexander, 
Chairman of the Committee, presiding.
    Present: Senators Alexander [presiding], Cassidy, Young, 
Scott, Murray, Casey, Bennet, Baldwin, Murphy, Warren, Kaine, 
Hassan, and Smith.

                 OPENING STATEMENT OF SENATOR ALEXANDER

    The Chairman. The Senate Committee on Health, Education, 
Labor, and Pensions will please come to order.
    Please excuse my tardiness. I had gone to the Energy 
Committee to try to provide a quorum for markups, and I 
unsuccessfully--it didn't happen, so I left at 10 after. So 
we'll proceed ahead; I'm sorry to hold people up.
    This is another in a series of hearings as we work to reach 
a result by early spring on reauthorizing the Higher Education 
Act. Senator Murray and I will each have an opening statement, 
then we'll introduce the witnesses. We thank each of you for 
being here. After the witnesses' testimony, Senators will each 
have 5 minutes of questions.
    Before we begin, I want to express my concern about the 
large number of senior positions in the Department of Education 
that haven't been confirmed by the Senate even though this 
Committee first approved their nominations in some cases as 
long as three-and-a-half months ago.
    For a while, the responsibility for this delay could be 
shared with the Trump administration, which was slow to make 
nominations, but not anymore.
    The responsibility lies solely with the Democratic minority 
which is insisting on taking most of 1 week to confirm each 
nominee, knowing that there is not that much time for 
nominations on the Senate floor.
    So, 1 year after President Trump took office, only the 
following four positions at the Department of Education have 
been confirmed and are on the job: the Secretary; the Assistant 
Secretary for Special Education; the Assistant Secretary for 
Legislation; the Chief Financial Officer.
    This Committee has approved four other senior nominees that 
are awaiting a floor vote: the General Counsel, who was passed 
out of Committee on October 18; the Assistant Secretary for 
Civil Rights, out of Committee January 18; Jim Blew, Assistant 
Secretary for Planning, Evaluation, and Policy Development, out 
of Committee December 13; the Deputy Secretary, out of 
Committee March 13.
    Since everyone knows that the Senate majority will confirm 
these four nominees, and the American people expect the 
President to be able to have enough administrators in place to 
be accountable for the Federal activities in 6,000 colleges and 
100,000 public schools, my hope is that the minority will 
quickly allow the Senate to approve these nominees.
    This is not only happening at the Department of Education. 
There are 103 nominations on the Executive Calendar awaiting 
consideration by the Senate. This doesn't include judicial 
nominations.
    To put this in perspective, on November 21, 2013, when 
Democrats thought the confirmation backlog was dire enough to 
use the nuclear option to break the Senate rules, there were 76 
nominations on the Executive Calendar, less than today.
    Today we are looking at another important focus of our 
reauthorization of higher education, accountability, whether 
students are earning degrees worth their time and money.
    An important part of that accountability is to find ways to 
make sure students are not borrowing more than they will be 
able to pay back.
    Today, when students do not make payments on their loans, 
colleges are held somewhat accountable under the current cohort 
default rate measure.
    I believe Congress should consider new accountability 
measures that are more effective at holding all individual 
programs at all colleges and universities accountable for the 
ability of their students to pay back their loans.
    There is a lot of discussion about Federal student loan 
debt. While the amount spent on Federal aid each year is high--
about $120 billion, $28 billion in grants which don't have to 
be paid back, and $92 billion in loans which do--the average 
debt per undergraduate student is relativity low.
    At one of our previous hearings, Dr. Susan Dynarski 
testified: ``In the United States, typical undergraduate debt 
is less than $10,000 for those who don't complete a 4-year 
degree and about $30,000 for those who do. What's exceptional 
about the United States is therefore not student borrowing but 
a rigid, archaic repayment system that unnecessarily plunges 
millions into financial distress.''
    Historically, most student loans have been repaid and 
taxpayers recover most of their money. However, there are 
worrisome signs as we look ahead.
    Here is what the student loan repayment picture looks like 
today.
    There are two groups of borrowers repaying student loans: 
nearly half, 46 percent, who are repaying their student loans; 
and a little more than half, 54 percent, who are in default or 
are not making their payments on loans.
    Of the more than half who are not repaying their student 
loans, 21 percent are in default, 21 percent of all borrowers 
in default, meaning they have not made a payment in over 9 
months.
    The current method of holding colleges accountable for 
students making their loan payments is based on the cohort 
default rate, the 21 percent of borrowers who are in default.
    There are another 33 percent of all borrowers who are not 
making their payments on time. These borrowers are not taken 
into account in the current default rate measure. About two-
thirds of these borrowers are not making payments because of 
economic hardship, and one out of three are at least 5 days 
late on making a payment for a variety of reasons.
    The taxpayer should be concerned not just about the 21 
percent in default, but also about the 33 percent of borrowers 
who are not making their payments on time.
    The half who are making payments, nearly two-thirds of them 
are in the income-based repayment program. The income-based 
repayment program is a safety net for low-income borrowers 
enacted by Congress in 2007. It sets a cap on monthly student 
loan payments. If the loan is not repaid after 20 or 25 years 
at this capped payment rate, the loan is forgiven.
    Today, a portion of these borrowers, while considered in 
good standing, have a student loan payment of zero because 
their income is too low.
    What was designed as a temporary safety net has become the 
standard where students expect their debt to be forgiven after 
a certain amount of time. This may be good for the student, but 
it is not so good for the taxpayer.
    We will not know the impact of so many borrowers being in 
the income repayment program for another decade, when the first 
set of borrowers begin to have their debt forgiven.
    Since the last bipartisan reauthorization of the Higher 
Education Act, the Federal Government has become the provider 
of all loans for students. I didn't agree with that, but now 
that the Federal Government is the bank, we must do what a bank 
does, which is to protect its shareholders, and the 
shareholders are the American taxpayers.
    When a commercial bank makes a loan, it underwrites the 
loan or checks the credit of the borrower to determine whether 
the borrower is able to pay the loan back.
    In the case of student loans, there is no underwriting, no 
credit check. Students borrow roughly $100 billion each year in 
individual loans that may go as high as $12,500 for an 
undergraduate and as high as the cost of tuition for graduate 
students.
    As we have just discussed, students may pay their loan back 
based on their income, and if they are not able to pay it all 
back in 20 or 25 years, the loan may be forgiven.
    I'm not ready to turn roughly $100 billion in loans into 
grants, so we need effective ways to protect the taxpayer as 
well as the student.
    As we continue our work on reauthorizing the Higher 
Education Act, I want to look at how we hold all schools--
public, private, and for-profit--accountable when students 
borrow too much and are not prepared to pay those loans back.
    One way to do that is to provide students with more data on 
the cost of college and what their likely earnings would be in 
the curriculum or program they choose.
    Another way would be to remove barriers and encourage 
schools to counsel students about the amount of money they can 
afford to borrow.
    Another is to look at ways to hold the schools themselves 
more accountable.
    There are several proposals by Members of this Committee, 
other Members of Congress, and outside organizations that 
reflect the interest in holding colleges and universities more 
accountable for students repaying their loans.
    One is a proposal from Senators Hatch and Shaheen. It 
proposes fixing the cohort default rate system to instead look 
at the percentage of students who fail to pay down at least $1 
of their principal loan balance within 3 years.
    The House Committee on Education took an approach similar 
to Hatch-Shaheen which required college programs to have at 
least 45 percent of borrowers in ``positive repayment status.''
    Another proposal by the Hamilton Project suggests creating 
a cohort repayment rate, not to be confused with cohort default 
rate, to look at the percentage of Federal student loan dollars 
that have been repaid in the 5-years after borrowers leave 
school.
    It would be possible to apply this at the program level as 
well. Evaluating individual programs rather than applying a 
blanket sanction to a college that has both excellent and 
failing programs would help inform students' choices and spend 
Federal dollars more responsibly.
    Using student loan repayment rates in an appropriate way to 
measure accountability for all programs at all of our 6,000 
colleges and universities would be, in my view, a step in the 
right direction.
    To be clear, we want to ensure students are getting a 
quality education and that they are not borrowing more than 
they can afford to pay back to the taxpayers who are making the 
loan.
    This hearing and our continued conversations is one of our 
five key areas we need to address in our reauthorization of the 
Higher Education Act this spring. Just as we released white 
papers in 2015 on accreditation, risk sharing and consumer 
information, my staff plans to release a staff white paper 
later this week intended to continue this thoughtful discussion 
on what it entails to have a robust accountability system.
    Senator Murray.

                  OPENING STATEMENT OF SENATOR MURRAY

    Senator Murray. Thank you, Chairman Alexander.
    One of the reasons you and I are able to work together to 
tackle big, important issues like higher education is because 
we work to find common ground and negotiate in good faith.
    But our work is never over when the laws are passed. We 
have to continue to work together, as you well know, to make 
sure it is implemented as we intended.
    I really just want to say at the top that I appreciate that 
you listened to my concerns about the Department's 
implementation of the Every Student Succeeds Act so far, and I 
do look forward to hearing from Secretary DeVos. I really know 
that you and I can work together to resolve the concerns with 
implementation of our last bipartisan education law before we 
begin negotiating on this one, so I appreciate it.
    Now, I want to thank all of our witnesses for being here 
today. I hope to hear from you how we can better hold all of 
our colleges accountable for students' success in higher 
education, and your thoughts will be very valuable to us as we 
begin to negotiate the reauthorization of the Higher Education 
Act.
    I think by now it's very clear the issues in our higher 
education system are deep-rooted and vast. Our caucus has very 
clear priorities that need to be addressed if we are going to 
reauthorize this law.
    We have to look at all the challenges that students are 
facing, including addressing the rising costs of college; 
providing access to higher education to everyone who wants it; 
ensuring students are able to learn in a safe environment free 
from discrimination and harassment and assault; and as we will 
discuss today, supporting students to help them complete their 
education and be prepared for success after college. In short, 
students should be better off, not worse off, after enrolling 
in college.
    It may be hard to get consensus across the aisle on these 
issues, but I am really hopeful we can get there. And I think 
it's really clear from the number of times accountability came 
up in last week's hearing on access and innovation that these 
issues intersect.
    It is important that we reauthorize the Higher Education 
Act in a way that addresses all of the issues comprehensively 
and takes into account how they are related to each other.
    Now I want to go into what accountability means and why 
it's so important for students.
    We ask our students to make enormous decisions about their 
future--where to go to school, what kind of program best fits 
their needs, and what to study.
    But in order to make the best decisions, students need 
better and more complete information to make the right choice 
for them.
    Because the Federal Government invests so heavily in higher 
education, it is our job to hold all colleges receiving Federal 
funding accountable when they are failing our students to make 
sure that taxpayers are getting a good return on that 
investment.
    Students, too, deserve to know they are going to get a 
return on their hard work and money and won't be saddled with 
debt they can't repay.
    I know there will be many ideas discussed today, but there 
are three points I feel must be included in any conversations 
about better accountability in higher education.
    First, we cannot create a one-size-fits-all accountability 
system for the more than 7,000 colleges in our entire higher 
education system. Community colleges differ vastly from 
traditional 4-year colleges, which differ from colleges that 
exclusively provide instruction online. And in some cases, 
schools may have different priorities, including for-profit 
colleges, which is an industry with a troubling history of 
sacrificing students? education for financial gain.
    It is only logical we would design accountability measures 
to take into account the different types of colleges and keep a 
closer eye on bad actors.
    Second, we need to hold schools accountable at all stages 
of a student's education, not just whether or not they can find 
a job after graduation.
    I think we can all agree, one of the core missions of 
higher education is to prepare students for the workforce, but 
to get there colleges also need to be encouraging students to 
complete college. Currently, a staggeringly low 55 percent of 
students graduate within 6 years.
    Accountability systems also need to ensure colleges play a 
bigger role in making higher education more accessible and 
supportive for underrepresented students.
    By holding schools accountable for all phases of a 
student's education, we can ensure colleges aren't avoiding 
enrolling underrepresented students. We can't allow schools and 
colleges to close the door on the students who have the most to 
gain from higher education simply because they may face 
additional challenges than their more advantaged peers.
    Finally, our system of accountability also has to recognize 
the incredible investment we are asking our students and 
families to make, often in the form of debt.
    Colleges that load students with debt that they can't 
repay, or fail to prepare students to be successful in paying 
down their debt, should not be able to benefit from taxpayer 
dollars.
    We have a crisis of borrowers falling further and further 
behind on their debt, particularly students of color, and we 
have to address the root causes.
    When Chairman Alexander and I negotiated the Every Student 
Succeeds Act, we agreed the previous education law was broken 
but that we needed to maintain a focus on our most vulnerable 
students and not allow them to fall through the cracks. And 
since it is clear students' education very rarely ends with 
high school these days, we need to maintain that same focus on 
underserved students in our HEA reauthorization.
    As I mentioned, only 55 percent of students are graduating 
in a timely manner. Disappointingly, that already low number is 
even lower for Latino, African American, and low-income 
students.
    Just as we clearly required in ESSA, we must ensure higher 
education is paying attention to groups of students who have 
previously struggled and using their success as a key factor in 
our accountability system.
    These are really broad issues, and I know many ideas will 
be discussed today, but I want to make one thing clear: we 
should be building a stronger accountability system. And all 
the options discussed today should be in addition to, not in 
replacement of, our current accountability measures.
    We can't loosen guardrails and give colleges free range 
just because they ask for it.
    Instead, we need to use evidence to determine which 
accountability measures produce good results for our students 
and which guardrails need to be strengthened. Our students' 
success should be our number-one priority.
    Thank you, Mr. Chairman.
    The Chairman. Thank you, Senator Murray.
    I'm pleased to welcome our witnesses.
    The first witness is Dr. Anthony Carnevale, whom I've 
quoted frequently in these hearings. He is Research Professor 
and Director of the Georgetown University Center on Education 
and the Workforce. He previously worked at the Educational 
Testing Service, the Committee on Economic Development, the 
Institute of Workplace Learning. He's held several positions 
here on Capitol Hill. He's been appointed to various White 
House commissions by three Presidents. He earned his Ph.D. in 
Public Finance Economics at Syracuse University.
    Ms. Mamie Voight is our second witness, Vice President of 
Policy Research at the Institute for Higher Education Policy. 
She leads that institute's projects on affordability and post-
secondary data policy. Her team currently manages a program 
called the Post-Secondary Data Collaborative, which advocates 
for using high-quality data to advance equity and student 
success.
    Our next witness is Dr. Jose Luis Cruz, President of Lehman 
College in the City University of New York. He was Provost of 
California State University-Fullerton, Vice President of Higher 
Education Policy and Practice at the Education Trust, and Vice 
President of Student Affairs for the University of Puerto Rico 
system. He's testified before Congress, received his doctorate 
from Georgia Tech.
    Our fourth witness is Mr. Jason D. Delisle, Resident Fellow 
at the American Enterprise Institute. His work focuses on 
higher education financing, with an emphasis on student loans. 
He was previously Director of the Federal Education Budget 
Project at New America. He started his career on Capitol Hill 
with Congressman Tom Petri and later was with the Senate Budget 
Committee.
    Our final witness is Mr. Ben Miller, Senior Director of 
Post-Secondary Education at the Center for American Progress. 
His work focuses on higher education accountability, 
affordability, and financial aid, as well as for-profit 
colleges and other issues. He was previously the Research 
Director for Higher Education at New America and a Senior 
Policy Advisor in the U.S. Department of Education.
    I look forward to everyone's testimony. I thank you all for 
being here.
    We would ask you to summarize your comments in 5 minutes so 
that we can have exchanges with the Senators, and we'll try to 
keep the exchanges at about 5 minutes as well, so everyone has 
a chance to participate.
    Dr. Carnevale, let's begin with you. Welcome.

 STATEMENT OF ANTHONY P. CARNEVALE, PH.D., RESEARCH PROFESSOR 
AND DIRECTOR, GEORGETOWN UNIVERSITY CENTER ON EDUCATION AND THE 
                   WORKFORCE, WASHINGTON, DC

    Dr. Carnevale. Good morning, Chairman Alexander, Ranking 
Member Murray, and distinguished Members of the Committee.
    The short version of my testimony is that I think American 
higher education is risky business, has been for a while, and 
for students and taxpayers it's getting riskier all the time. 
And I think what we need to do about that in a deliberate way 
is to begin using information effectively to make markets in 
higher education work better, initially with transparency and 
with some considerable accountability to follow, in my 
judgment.
    The truth is we're already awash in data in higher 
education, but we don't have the data we need, and we don't use 
it effectively to help consumers or policymakers or taxpayers 
figure out how to best invest in higher education for 
themselves or their children.
    I would argue that while there's lots of data it would be 
nice to have, I think what we need most is data that connects 
programs to jobs and careers. I think that's the priority given 
the rising costs and the rising importance of post-secondary 
education in our economy.
    I would offer four or five reasons why I think we need to 
act and need to act as soon as possible.
    First, we have real performance problems in American higher 
education. The Canadians spend 2.6 percent of their GDP on 
higher ed. We spend 2.7 percent of our GDP on higher ed. They 
get a 56 percent completion rate. We get a 46 percent 
completion rate. Every year, 500,000 American high school 
students graduate in the upper half of their class, but 8 years 
later, as far as we can track them, they have not achieved 
either a certificate, a 2-year degree, or a 4-year degree.
    So this is not altogether about people being unprepared. 
It's not about K-12 altogether. There is failure at the higher 
education level as well.
    The best summary evidence I have, I think, of our problem 
is that the majority of Americans, barely a majority, 51 
percent, in a Gallup poll tell us now that if they had it to do 
over again they would change their degree, their program, their 
institution, but they don't have it to do over again. So I 
think the consumers are telling us something loud and clear.
    Second, I would argue that we need program-level employment 
and earnings outcomes because, truth be told, higher education 
programs have become our biggest and most effective jobs 
program. In America, it used to be in the 1970's that two out 
of three workers had high school or less, and they were doing 
fine. We know how they're doing now. They're very angry. The 
economy has moved past them. Nowadays, two out of three workers 
need some post-secondary education and training to get a job 
that, at a minimum, pays $35,000 through their 30's, $45,000 
after that, and averages $55,000 over a career. That is, I 
think, a fair family wage, especially in a two-earner family, 
where at least on the ground if you've got somebody at $55,000, 
you've got another person at $40,000.
    So I think we have to think of higher education as a jobs 
program and as workforce development. That is new for higher 
education. It didn't have to perform that function before. And 
with the function comes new responsibilities.
    I think that we also know that while economic value is not 
the only reason people go to college, regularly the surveys say 
about 70 percent, often more, say they go to college to have a 
career, but in those same surveys, if you look deeper down 
you'll find that 50 percent say they go to college to study 
things that interest them, and you always get a number 
somewhere around 30 percent who say I go to college so I can be 
a better person.
    Americans want a lot out of college. But the first thing 
they want is a successful career, because in a capitalist 
economy, if you can't get a job, you're not really a person. So 
that's the priority for them as a matter of necessity. The 
other stuff is nice, and I think should be made affordable for 
them. But the job I think is the priority.
    I think in the end, the third reason is that we've come to 
the point that, in fact, we're already running a higher 
education system that is a job training program. That is, in 
the United States now, the market in higher education is more a 
market in programs than it is in institutions. We're accustomed 
to thinking of higher education as a market in institutions--do 
I go to Georgetown, do I go to NYU, do I go to UVA? That's 
really not the issue.
    We now live in an economy where at every level--graduate, 
BA, a 2-year degree, certificate--the ratio of earnings by 
field of study at each of those levels exceeds 5-to-1. There's 
an enormous difference now in the returns to different fields 
of study. It's really a program-driven system from an economic 
point of view, and it's a system where nowadays 40 percent of 
people who get a Bachelor's degree earn more than the average 
graduate degree, a good 30 percent of people who get 2-year 
degrees earn more than the average BA because of the field of 
study they're in. There are lots of certificates now, 
especially technical certificates, that make more than a 2-year 
degree or a 4-year degree. And in some cases, when you're 
talking about social work and counseling, they earn more than 
graduate degrees. A Master's in social work counseling and 
early childhood education earns less, a lot less, than people 
who get a certificate in heating ventilation and air 
conditioning.
    It is a system now where----
    The Chairman. Dr. Carnevale, you're well over time.
    Dr. Carnevale. Oh, sorry. So my point is that it's a system 
that already operates in terms of a set of programs and not a 
set of institutions, and accountability needs to recognize 
that.
    [The prepared statement of Dr. Carnevale follows:]
               prepared statement of anthony p. carnevale
    Good morning, Chairman Alexander, Ranking Member Murray, and 
distinguished Members of the Committee. Thank you for the opportunity 
to testify today about the return on investment in college programs.
    The old rules of thumb--go to college, graduate, and get a job--are 
no longer enough to navigate today's complex world. \1\ The 
relationship between education after high school and jobs has become 
much trickier to navigate. Learners and workers need a clear guidance 
system that will help them make good decisions about college and career 
that lead to fulfilling, purposeful lives while supporting their 
families.
---------------------------------------------------------------------------
    \1\  Carnevale et al., Career Pathways, 2017. https://
cew.georgetown.edu/cew-reports/careerpathways/
---------------------------------------------------------------------------
    Today's economy is far more complex than those of decades past. We 
have more occupations, programs of study, colleges and universities, 
and students than ever before. Since 1950:

      the number of occupations in the labor market has grown 
from 270 to 840 \2\
---------------------------------------------------------------------------
    \2\  Ibid.
---------------------------------------------------------------------------
      the number of colleges and universities has grown from 
1,800 to 4,700 \3\
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    \3\  Ibid.
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      the number of students enrolled in colleges and 
universities has grown from 2 million to 20 million. \4\
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    \4\  Ibid.

    Meanwhile, since 1985, the number of postsecondary programs of 
study has grown from 400 to 2,300. \5\
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    \5\  Ibid.
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    In recent years, the variety of postsecondary credentials--
including degrees, certificates, certifications, licenses, and badges 
and other micro-credentials--has multiplied rapidly. New providers as 
well as delivery modes and models, such as online and competency-based 
education, have added further to the growing complexity and confusion. 
This has translated into an explosion of choices and decisions that 
make it hard for people to navigate through college and careers.
    Colleges have become very expensive, with tuition and fees at 
public 4-year colleges and universities growing 19 times faster than 
the median family income since 1980. \6\ The trend toward state 
disinvestment in postsecondary education for the past three decades has 
shifted the financial burden to students and their families. \7\
---------------------------------------------------------------------------
    \6\  Georgetown University Center on Education and the Workforce 
analysis of the College Board, Trends in College Pricing 2015, 2015, 
Table 2A; U.S. Census Bureau and Bureau of Labor Statistics, Current 
Population Survey, March Supplement, 1980, 2016.
    \7\  State Higher Education Executive Officers, ``SHEF fiscal year 
2016,'' 2017. http://sheeo.org/shef2016
---------------------------------------------------------------------------
    As prices have gone up, we've fallen from first to seventh in 
postsecondary attainment among OECD nations. \8\ Our Canadian neighbors 
now achieve a 56 percent college credential attainment rate by spending 
2.6 percent of their GDP on higher education, while America achieves a 
46 percent attainment rate by spending 2.7 percent of ours. \9\ At this 
productivity rate, American higher education would have to spend as 
much as $200 billion more per year to catch the Canadians--an amount we 
simply can't afford. \10\
---------------------------------------------------------------------------
    \8\  OECD, Education at a Glance, 2017. http://www.oecd.org/edu/
education-at-a-glance-19991487.htm
    \9\  Ibid.
    \10\  Georgetown University Center on Education and the Workforce 
analysis based on data from the U.S. Census Bureau, OECD, Federal 
Reserve Bank of St. Louis, and National Center for Education and 
Statistics surveys. A range of estimates using different methods 
suggest a range between $120 billion and $240 billion.
---------------------------------------------------------------------------
    If students are investing more to go to college, they need to have 
answers to basic questions about the value of postsecondary education. 
They need better information to make decisions that have lifelong 
economic consequences, and this information should be delivered in new 
ways. In addition, the governance, accreditation, and financing of 
postsecondary education must go beyond student completion as a goal and 
be connected to measurable post-college outcomes.
    While completion is an important metric for improving efficiency, 
it ignores the relationship between learning and earning in particular 
fields of study, as well as the social and economic value of general 
education. If we don't change the way we think about providing 
postsecondary education and training, we will continue to have a system 
with runaway costs driven by institutional prestige rather than 
learning and earning outcomes.
    Today's ecosystem of postsecondary credentials is complex, 
fragmented, and multilayered. This presents significant challenges to 
learners, employers, and policymakers. We don't know enough about the 
learning and competencies required to receive specific credentials. We 
also don't know how various credentials across diverse fields are 
valued, or how they interact with one another. Employers traditionally 
have used specific credentials as signals of workers' competencies. But 
today they are unable to assess the value of different credentials and 
want to know how the competencies that underlie credentials match job 
requirements. Without clear, comprehensive, and actionable information, 
mediocrity prevails, and reputation rather than quality (captured by 
earnings returns) is rewarded.
    Measuring learning and earning at the program level is the key to 
unbundling the value of postsecondary education options. Currently we 
have ways to measure earning, but we are far away from being able to 
measure learning. Why is measuring learning important? General 
education competencies make workers more flexible and more adaptable to 
changing technology, which is advantageous over the course of a career.
    In the long term, we will need to figure out which combination of 
general and specific competencies prepare workers better for 
occupations. For now, the new relationship between postsecondary 
programs and the economy comes with rules that require much more 
detailed information about the connection between individual 
postsecondary programs and career pathways:

    RULE 1. On average, more education yields more pay.
    Over a career, an average high school graduate earns $1.4 million; 
an Associate's degree holder earns $1.8 million; a Bachelor's degree 
holder earns $2.5 million; a Master's degree holder earns $2.9 million; 
a PhD holder earns $3.5 million; and a professional degree holder earns 
$4 million. \11\
---------------------------------------------------------------------------
    \11\  Carnevale et al., The College Payoff, 2011. https://
cew.georgetown.edu/cew-reports/the-college-payoff/
---------------------------------------------------------------------------
    RULE 2. What a person makes depends on what that person takes.
    A major in early childhood education pays $3.4 million less over a 
career than a major in petroleum engineering. \12\
---------------------------------------------------------------------------
    \12\  Carnevale et al., The Economic Value of College Majors, 2015. 
https://cew.georgetown.edu/cew-reports/valueofcollegemajors/
---------------------------------------------------------------------------
    RULE 3. Sometimes less education is worth more.
    Holders of IT certificates who work in field earn $70,000 per year 
compared with $61,000 per year for the average bachelor's degree 
holder. \13\ Thirty percent of associate's degree holders make more 
than the average bachelor's degree holder. \14\
---------------------------------------------------------------------------
    \13\  Carnevale et al., Certificates, 2012. https://
cew.georgetown.edu/cew-reports/certificates/
    \14\  Carnevale et al., The College Payoff, 2011. https://
cew.georgetown.edu/cew-reports/the-college-payoff/
---------------------------------------------------------------------------
    RULE 4. What a student studies matters more than where they study 
it.
    Over the past three decades, the college wage premium--how much 
college graduates earn relative to high school graduates--has doubled, 
\15\ but the variation in earnings by college major has grown even 
more. \16\
---------------------------------------------------------------------------
    \15\  Carnevale et al., The Undereducated American, 2011. https://
cew.georgetown.edu/cew-reports/the-undereducated-american/
    \16\  Carnevale et al., The Economic Value of College Majors, 2015. 
https://cew.georgetown.edu/cew-reports/valueofcollegemajors/
---------------------------------------------------------------------------
       Measuring the Economic Value of Programs vs. Institutions
    All of our research and that of our colleagues in the field 
suggests that programs, not institutions, are the fundamental units 
that transmit economic value to students. That is because it is a 
student's major or field of study that has the strongest relationship 
with the kind of career a student pursues after college. The variation 
in earnings across college programs is far greater than the variation 
in earnings across colleges.
    In other words: What a student studies is more important than where 
they study it.
    That is why many workers with less education earn more than those 
with more education. For example:

       Bachelor's degree holders who majored in STEM, business, 
or health fields earn more than graduate degree-holders who studied 
education or social work.
       Associate degree holders who studied engineering, IT, or 
health earn more than bachelor's degree holders who majored in the arts 
or English.

    In terms of labor market outcomes, institutions matter, but 
programs matter more.
    Take the University of Texas system, for example. Graduates from 
open-access UT System colleges who complete degrees in high-paying 
majors can earn more than UT System graduates from selective colleges. 
\17\ Architecture and engineering; computers, statistics, and 
mathematics; and health majors at both middle-tier and open-access UT 
System colleges earn more than those who major in physical sciences, or 
humanities and liberal arts at selective UT System colleges. In fact, 
graduates of open-access UT System colleges who majored in architecture 
and engineering have median earnings greater than 61 percent of all 
graduates from selective UT System colleges.
---------------------------------------------------------------------------
    \17\  Carnevale et al., Major Matters Most, 2017. https://
cew.georgetown.edu/wp-content/uploads/UT-System.pdf
---------------------------------------------------------------------------
                Why We Need Program-Level Earnings Data
    The Federal Government has a compelling interest in measuring how 
well the Nation's large investment in Title IV student aid pays off to 
students and taxpayers. This can be done most effectively with program-
level data. While it is true that colleges provide immense and often 
unmeasured social value, the economic value the programs provide can 
and should be measured: the economic benefit associated with college is 
the chief reason students pursue a college education and one of the 
principal reasons taxpayers invest in higher education. Higher 
education has the power to promote economic mobility and equity but 
will ultimately fail to do so if higher education programs aren't 
successfully preparing students for careers.
    Currently, the Federal governance of higher education is based on a 
primitive accountability structure, accreditation, that is demonstrably 
flawed. This system has led to egregious outcomes and a waste of public 
funds in the case of many for-profit colleges and many programs at 
nonprofit providers as well. The basic flaw in the model that is used 
by regional accreditors and other third-party entities is that the 
system is designed to set standards and provide feedback to colleges, 
not to measure outcomes and regulate the funding of programs.
    Instead, we need to deliver usable consumer information at the 
program level and to define outcomes-based standards to fund programs 
based on their employment and earnings outcomes. Doing so would promote 
efficiency and innovation in higher education by opening up the higher 
education market to competition among different kinds of postsecondary 
education and training providers. It would shift Federal governance 
away from awarding funding based on the number of beakers colleges have 
in a lab to awarding programs that lead to career and life success for 
their students. And it will do this while maintaining institutional 
autonomy.
    That newly established consumer information should be made 
available to postsecondary program providers so they can make informed 
choices about their program offerings and performance.
    Gathering good information is not enough, however. We need to get 
that information into the hands of consumers in a user-friendly format 
that aids their decisions. To accomplish that, we must (1) build 
program-level information systems at a level of aggregation that 
ensures individuals' privacy and (2) unleash the private sector to 
transform that aggregated, open-source information into a user-friendly 
format that aids the education and career decisions of prospective 
college students and their families.
                                 ______
                                 
              [summary statement of anthony p. carnevale]
    American higher education is risky business for students and 
taxpayers, and it's getting riskier. The cost of college has been 
rising far faster than family incomes for decades. As prices have gone 
up, we've fallen from first to seventh in postsecondary attainment 
among OECD nations. Our Canadian neighbors now achieve a 56 percent 
college credential attainment rate by spending 2.6 percent of their GDP 
on higher education, while America achieves a 46 percent attainment 
rate by spending 2.7 percent of ours. At this productivity rate for 
American higher education, we would have to spend as much as $200 
billion more per year to catch the Canadians--an amount we simply can't 
afford. Not surprisingly, a Gallup/STRADA poll found that 51 percent of 
college graduates would change their degree type, institution, or major 
if they could do it.
    Every year, more than 500,000 of our best students, those in the 
top half of their high school class, give college a try but never earn 
a degree or certificate. Even among those who get BAs, more than 20 
percent end up in jobs that don't require college-level skills and pay 
high school-level wages.
    Our non-system of postsecondary education is a $530 billion black 
box with no operating system. If we are to improve the return on 
investment to higher education and reduce economic risk to consumers, 
we need to increase transparency and performance standards at both the 
institutional and program levels. We are already awash in institutional 
performance metrics. What we need most is much more program level 
transparency and accountability. Why?
    First, program level data on employment and earnings outcomes is 
urgently needed because higher education programs have become our 
biggest and most effective jobs program. Increased economic value is 
responsible for most of the phenomenal growth in postsecondary 
enrollment since the 1980's and is the principle reason students 
attend.
    Second, college is becoming a market in programs as much, if not 
more, than it is a market in institutions. We now live in an economy 
where there is at least a 5:1 ratio between the highest and lowest paid 
fields of study at every degree and certificate level. Because of 
differences in field of study, 40 percent of BA holders earn more than 
the average graduate degree holder, 30 percent of AA holders earn more 
than the average BA holder, and many 1-year certificate holders earn 
more than many AA and BA holders.
    Third, the variety of postsecondary programs and credentials has 
become too vast for consumers to navigate without help. Colleges and 
other postsecondary providers are responding with a blizzard of 
degrees, certificates, licenses, certifications, badges, and other 
micro-credentials delivered through various media. No one really knows 
what all these programs and awards mean. As a result, the postsecondary 
education system has become a Tower of Babel resting on unsupported 
claims.
    Fourth, shifting transparency and accountability to the program 
level will trigger longer term market-based reforms inside the black 
box of institutional finances in higher education. Program-level 
information would unbundle institutional spending, tighten the 
connection between learning and earning, encourage competition among 
program providers, and foster specialization. These dynamic market 
forces are moving us away from the current cafeteria system in which 
every college has to offer every program to be competitive. 
Accreditation based on economic outcomes can rejuvenate current 
practices gone stale. Finally, program-level information on employment 
and earnings, aggregated and made available to the public, would 
encourage competition among providers to develop counseling tools for 
institutions and families.
                                 ______
                                 
    The Chairman. Thank you. We'll look forward to continuing 
the conversation.
    Ms. Voight, welcome.

 STATEMENT OF MAMIE VOIGHT, VICE PRESIDENT OF POLICY RESEARCH, 
     INSTITUTE FOR HIGHER EDUCATION POLICY, WASHINGTON, DC

    Ms. Voight. Thank you, Chairman Alexander, Ranking Member 
Murray, and Members of the Committee.
    My name is Mamie Voight, and I am Vice President of Policy 
Research at the Institute for Higher Education Policy, or IHEP, 
a non-profit, non-partisan organization that promotes college 
access and success, particularly for underserved students.
    IHEP also leads the Post-Secondary Data Collaborative, a 
non-partisan coalition of organizations representing students, 
institutions, states, employers, and privacy and security 
experts. Together, we seek to advance the use of high-quality 
data to improve student success and educational equity.
    The research is clear: college investments pay off for 
students and for our country. Graduates earn more, pay more in 
taxes, and are healthier. College is a pathway out of poverty, 
with low-income students five times more likely to climb the 
economic ladder if they earn a degree.
    Yet where a student goes to college ultimately shapes her 
ability to climb that ladder. Research shows time and again 
that outcomes vary dramatically across institutions and 
programs, even those enrolling very similar students.
    For our most vulnerable students with the most to gain from 
college and the most to lose if things go wrong, the stakes are 
high. And for taxpayers counting on Federal policymakers to 
responsibly steward their $157 billion higher education 
investment, the stakes are equally as daunting. Students and 
taxpayers should expect some degree of accountability to manage 
this risk.
    Instead, students, policymakers, and institutions cannot 
answer critical questions about which programs at which 
institutions provide an adequate return on investment, and for 
which students. Any accountability system, whether it be 
market-based, incentive structures, or other systems, must be 
grounded in reliable evidence.
    This need for evidence holds regardless of who or what is 
driving the accountability system--student choice, the Federal 
Government, state governments, or accreditors. Yet both 
students and policymakers must make decisions with incomplete 
information.
    Imagine buying a car without knowing its fuel economy or 
safety rating, or purchasing a home without knowing critical 
details revealed in the inspection. Now imagine assisting a 
loved one trying to decide between two colleges. She asks 
questions like: Do part-time black students graduate? What 
types of schools do students transfer to? And how do graduates 
fare in the workforce? Your loved one won't be able to answer 
those questions because the available data are incomplete. And 
right now, even as stewards of $157 billion in Federal 
investments, neither can you.
    Federal policy is what stands in the way of answering these 
questions, even though the data to answer them already exist. 
Our data infrastructure is duplicative, inefficient, and 
excludes many students. Institutions and states have recognized 
this insufficiency of Federal data and tried to plug the holes 
themselves. But piecemeal, voluntary reporting isn't enough.
    In a state like Virginia, many residents would be missing 
in state-based employment data just because they work for the 
Federal Government, they are members of the military, or they 
work across state lines in Maryland or D.C.
    Recent Federal attempts to measure workforce outcomes are 
insufficient too, because they omit the 30 percent of students 
who do not receive Federal financial aid. By not counting all 
students, these metrics produce incomplete results, ignore non-
aided students' needs, and stymie efforts to evaluate equity. A 
better, more complete solution exists.
    A secure, privacy-protected, post-secondary student-level 
data network like the one proposed in the bipartisan College 
Transparency Act would integrate existing Federal, state, and 
institutional data sources into a more coherent, nimble, 
secure, and privacy-protected network. It would leverage 
existing systems to create better information that counts all 
students, while reducing reporting burden on institutions.
    More than 130 organizations representing students, 
colleges, veterans and employers have endorsed the College 
Transparency Act, recognizing that it would create a more 
functional post-secondary marketplace and empower actors across 
the system.
    The Federal Government is uniquely positioned to compile 
better post-secondary information. It is the only entity with 
comprehensive workforce data, including for students who cross 
state lines, and the only entity that can collect consistent, 
comparable data from colleges across the country.
    Good policy and good decisions are grounded in good 
evidence, transparency, and accountability. As you work to 
reauthorize HEA, consider the questions you want to ask but 
cannot answer. Consider your role in protecting students and 
taxpayers, and consider the student whose college choice will 
define her future.
    Please safeguard taxpayer investment, help students climb 
the economic ladder, and secure their future.
    Thank you.
    [The prepared statement of Ms. Voight follows:]
                   prepared statement of mamie voight
    Chairman Alexander, Ranking Member Murray and Members of the 
Committee, thank you for the opportunity to testify today.
    My name is Mamie Voight, and I am Vice President for Policy 
Research at the Institute for Higher Education Policy (IHEP), a 
nonprofit, nonpartisan, research, policy, and advocacy organization 
working to promote college access, success, and affordability, 
particularly for students who are underserved by our postsecondary 
system--including low-income students and students of color.
    The research is abundantly clear: investing in a college education 
pays off. \2\ But while college is often a worthwhile investment, 
students, policymakers, and institutions cannot answer crucial 
questions about which programs at which institutions provide an 
adequate return on this investment, and for which students. This 
failure to answer key questions hampers policymaker efforts to design 
and implement accountability systems that manage the risk to taxpayers 
and students.
---------------------------------------------------------------------------
    \2\  Ma, J., Pender, M., & Welch, M. (2016). Education Pays 2016. 
The College Board. Retrieved from https://trends.collegeboard.org/
sites/default/files/education-pays-2016-full-report.pdf
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    Those risks are real, especially for the most vulnerable students 
with the most to gain from a higher education, but also the most to 
lose if things go wrong. College is a pathway out of poverty, with low-
income students five times more likely to climb the economic ladder if 
they earn a college degree than if they don't. \3\t, where a student 
goes to college ultimately shapes her opportunity to climb those rungs. 
Outcomes vary dramatically across institutions and programs--even those 
enrolling similar types of students. Quality data about postsecondary 
outcomes are necessary to illuminate those patterns in ways that can 
inform policymaker efforts to protect taxpayer dollars.
---------------------------------------------------------------------------
    \3\  Urahn, S. K., & Plunkett, T. (2013). Moving on up: Why do some 
Americans leave the bottom of the economic ladder, but not others? 
(Issue Brief). Retrieved from The Pew Charitable Trusts website:http://
www.pewtrusts.org/en/research-and-analysis/reports/0001/01/01/moving-
on-up
---------------------------------------------------------------------------
    At IHEP, we recognize that the use of high-quality data is 
necessary to drive improvements in student outcomes and educational 
equity, which is why we lead the Postsecondary Data Collaborative 
(PostsecData). PostsecData brings together dozens of organizations 
committed to the use of high-quality data to improve student success 
and close equity gaps. Working with these partners, which represent 
students, institutions, states, employers, and privacy and security 
experts, we conduct research, identify potential policy solutions, and 
advocate for higher quality data, all in the interest of better serving 
students. Grounded in a commitment to equity and better outcomes, more 
than 130 organizations recommend integrating existing Federal, state, 
and institutional data sources into a more coherent, nimble, secure, 
and privacy-protected student-level data network to create more usable 
information to inform decisionmaking.
       Patterns of evidence: Our current higher education system
    Data build patterns of evidence that can and should shape 
policymaking. The data we have now paint a troubling picture about 
student outcomes, especially for low-income students and students of 
color. While more students from all walks of life are going to college 
today, enormous gaps still separate black, brown, and low-income 
students from their peers. In fact, low-income students today go to 
college at the same rate that high-income students did four decades 
ago. \4\ And among first-time, full-time students at 4-year colleges, 
only 40 percent of Blacks, 54 percent of Hispanics, and 41 percent of 
American Indians graduate within 6 years, compared with 63 percent of 
Whites. \5\ All told, White young adults are about twice as likely as 
Black or Hispanic young adults to have attained a bachelor's degree, 
and high-income young people are six times more likely than those from 
low-income backgrounds to have had earned a BA. \6\
---------------------------------------------------------------------------
    \4\  U.S. Department of Education (2010). The condition of 
education (pp. 208, 210). Retrieved from: https://nces.ed.gov/
pubsearch/pubsinfo.asp'pubid=2010028; U.S. Department of Education 
(2017), The condition of education (pp. 234-235). Retrieved from: 
https://nces.ed.gov/pubsearch/pubsinfo.asp'pubid=2017144
    \5\  U.S. Department of Education (2017). Graduation rates for 
selected cohorts, 2007-12; Outcome measures for cohort year 2007; 
Student financial aid, academic year 2014-15; and Admissions in 
postsecondary institutions, fall 2015: First look (provisional data). 
Retrieved from: https://nces.ed.gov/pubsearch/
pubsinfo.asp'pubid=2017084
    \6\  U.S. Department of Education (2017). The condition of 
education (p. 45). Retrieved from: https://nces.ed.gov/pubsearch/
pubsinfo.asp'pubid=2017144; Bailey, M.J. & Dynarski, S.M. (2011). Gains 
and gaps: Changing inequality in U.S. college entry and completion, 
National Bureau of Economic Research (4, 26). Authors' calculations 
using 1997 National Longitudinal Survey of Youth. Retrieved from:http:/
/www.nber.org/papers/w17633
---------------------------------------------------------------------------
    Let's be clear: these gaps are not predetermined by demographics. 
Yes, because our system concentrates low-income students and students 
of color in K12 schools where we invest less and offer them less access 
to rigorous courses, some students come to college with less academic 
preparation. \7\t, academic preparation is far from the entire story, 
and data show us that. High-income students with low math scores attain 
a bachelor's degree at the same rate as low-income students with high 
math scores. \8\ other words, immense talent that could help fill 
workforce needs and build a stronger society is left untapped by an 
education system that leaves too many low-income students behind--
despite their academic strengths.
---------------------------------------------------------------------------
    \7\  Ushomirsky, N. & Williams, D. (2015). Funding gaps 2015. 
Retrieved from: https://edtrust.org/resource/funding-gaps-2015/; Chen, 
X., Wu, J., & Tasoff, S. (2010). Academic preparation for college in 
the high school senior class of 2003-04, Table 2 and Table 4 (Issue 
Tables No. NCES 2010-169). p. 6 and 10. Retrieved: http://nces.ed.gov/
pubs2010/2010169.pdf
    \8\  U.S. Department of Education (2005). Youth Indicators 2005 
(Table 21, p. 50).
---------------------------------------------------------------------------
    The patterns illuminated by the data make clear that what 
institutions do matters immensely for students, especially low-income 
students and students of color. Study after study finds that similar 
institutions enrolling similar students produce very different results 
for those students. \9\ke Georgia State University(GSU) and Kennesaw 
State University (KSU), for example. The SAT scores of entering 
students are about the same at both of these public colleges in 
Georgia, yet Georgia State enrolls higher proportions of low-income 
students (57 percent at GSU vs. 36 percent at KSU) and students of 
color (48 percent at GSU and 25 percent at KSU). Yet, graduation rates 
at Georgia State are 10 percentage points higher than at Kennesaw State 
(53 percent vs. 42 percent). \10\orgia State's efforts to use data to 
increase student success are discussed later in this testimony.
---------------------------------------------------------------------------
    \9\  Yeado, J. (2013), Intentionally successful: Improving minority 
student college graduation rates. Retrieved from: https://edtrust.org/
resource/intentionally successful-improving-minority-student-college-
graduation-rates/;Yeado, J., Haycock, K., Johnstone, R., & Chaplot, P. 
(2014). Higher education practice guide: Learning from high--performing 
and fast-gaining institutions. Retrieved from: https://edtrust.org/
resource/education-trust-higher-education-practice-guide-learning-from-
high-performing-and-fast-gaining-institutions/; The Upshot (2015). Top 
colleges doing the most for low-income students. Retrieved from: 
https://www.nytimes.com/interactive/2015/09/17/upshot/top-colleges-
doing-the-most-for-low-income-students.html; Hiler, T., Erickson 
Hatalsky, L., & John, M. (2016). Incomplete: The quality crisis at 
America's private, non-profit colleges. Retrieved from: http://
www.thirdway.org/report/incomplete-the-quality-crisis-at-americas-
private-non-profit-colleges; Nichols, A. & Evans-Bell, D. (2017). A 
look at black student success: Identifying top-and bottom-performing 
institutions. Retrieved from: https://edtrust.org/resource/black-
student-success/; Nichols, A. (2017). A look at Latino student success: 
Identifying top-and bottom-performing institutions. Retrieved from: 
https://edtrust.org/resource/look-latino-student-success/
    \10\  Data from College Results Online, www.collegeresults.org
---------------------------------------------------------------------------
    Demography most certainly is not destiny. Indeed, at the average 4-
year institution with an above-average share of Pell students, the 
graduation rate for Pell students is 39 percent. However, we know there 
are schools serving an even larger share of Pell students that have 
graduation rates that far surpass that bar, such as Spelman College (72 
Pell graduation rate) and Berea College (61 percent Pell graduation 
rate). \11\
---------------------------------------------------------------------------
    \11\  Third Way analysis of IPEDS data, 2018.
---------------------------------------------------------------------------
    Clearly what colleges do makes a difference for students. These 
variations in outcomes are exactly why we need quality evidence to 
inform student choice, protect taxpayer investments, facilitate 
institutional improvement, and close equity gaps.
              Accountability must be grounded in evidence
    Any accountability system--whether it be market-based 
accountability, bright-line indicators, incentive structures, or other 
systems--must be grounded in reliable evidence. This need for evidence 
holds regardless of who or what is driving the accountability system: 
student choice, the Federal Government, state governments, or 
accreditors. Indeed, Ranking Member Murray (D-WA) and Speaker Ryan (R-
WI) have reinforced a bipartisan commitment to data-driven policymaking 
by launching the Commission on Evidence-Based Policymaking. This effort 
brought together experts from both sides of the aisle ``to develop a 
strategy for increasing the availability and use of data in order to 
build evidence about government programs, while protecting privacy and 
confidentiality.'' \12\is commitment to evidence is key to designing 
and implementing good policies, especially within higher education, 
where data too often are incomplete or insufficient.
---------------------------------------------------------------------------
    \12\  Commission on Evidence-Based Policymaking, https://
www.cep.gov/
---------------------------------------------------------------------------
Much of our existing data are insufficient for students, policymakers, 
                            and institutions
    While some postsecondary data, such as information on the student 
loan program, are relatively complete, of high-quality, and ready to be 
used to improve accountability systems now, much of our data on student 
outcomes are insufficient. Through our work with the PostsecData 
Collaborative we know that our current postsecondary data 
infrastructure is a disjointed puzzle that needs to be improved. While 
our system is data rich, we are information poor. Institutions report 
data to multiple entities--states, accreditors, voluntary data 
initiatives, and various places within the Federal Government, 
including the Integrated Postsecondary Education Data System (IPEDS) 
and the National Student Loan Data System (NSLDS). In most cases, these 
various data systems do not talk with each other, and in some cases 
institutions are reporting very similar data to multiple places, piling 
on reporting and compliance burden that inhibits their capacity to use 
the data. In other instances, institutions must report data to the 
Department of Education that another Federal agency already holds, such 
as data on the receipt of veteran's education benefits.
    The current system falls short of answering critical questions 
about college enrollment, completion, costs, and outcomes, and many 
existing data collections fail to capture the diversity of students 
pursuing college today. To illustrate the lack of data available today, 
consider this:
    Ava is an African-American working mother of two and hopes to 
enroll at a local college part-time to learn a new skill. As Ava 
considers the postsecondary options in her community, she seeks answers 
to the following questions about each college:
      How do students fare in the workforce after leaving 
college?
       How much do students borrow, and can they successfully 
repay their loans?
      How many part-time African-American students graduate 
from colleges near me?
      How long does it take students to complete their degrees 
or certificates?
      What about the students who do not complete at community 
colleges? Do they transfer to a four--year school to complete their 
studies?
    Like all prospective students, Ava should be able to answer each 
before deciding where she will enroll. But existing policies prevent us 
from answering many of these basic questions.
    Furthermore, policymakers--at the Federal, state, accreditor, and 
institution level--also need answers to these questions to responsibly 
steward taxpayer funds and spur institutional improvement. Each year we 
invest billions of taxpayer dollars in our Nation's postsecondary 
education system. And targeted student aid helps millions of hard-
working students make the promise of a college education an attainable 
reality. Yet policymakers lack valuable information about which 
institutions provide an adequate return on investment for which 
students, making it difficult to enact policies to drive institutional 
improvement. That needs to change.
    Additionally, our Nation's college leaders seek to provide 
educational offerings that meet the needs of their students and 
position them for success. But many lack comprehensive information 
about how their students fare after leaving their institution--either 
for subsequent education or for employment. A strong postsecondary data 
infrastructure will help college leaders develop and implement targeted 
strategies aimed at supporting student success.
    Indeed, college leaders often cite data-use as a driving factor in 
helping them better serve students, and Federal policy should be 
responsive to these institutional needs. \13\ A more efficient and 
streamlined reporting system will reduce the current data-reporting 
requirements as well as the financial and human resources necessary to 
complete current requirements. Alleviating this burden, we hope, will 
allow institutions more time and resources to use the data to improve 
student outcomes.
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    \13\  Rorison, J. & Voight, M. (2016). Leading with data: How 
senior institution and system leaders use postsecondary data to promote 
student success. Institute for Higher Education Policy. Retrieved from 
http://www.ihep.org/sites/default/files/uploads/postsecdata/docs/
resources/ihep--leading--with--data----final.pdf; Using data to 
increase student success (case studies). Association of Public & Land-
grant Universities. Retrieved from http://www.aplu.org/projects-and-
initiatives/accountability-and-transparency/using-data-to-increase-
student-success/index.html
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    For example, some institutions have made marked gains in 
persistence and completion for students of color and low-income 
students by focusing deliberately on their data. They use data in two 
notable ways: (1) to create early alert systems that allow faculty or 
staff to quickly identify and intervene with students who show signs of 
being at risk of dropping out and (2) to evaluate trends by race/
ethnicity and income to uncover systemic inequities and barriers to 
student success.
    Institutions like Georgia State and Temple University have 
conducted robust data analyses to identify indicators that show 
students are falling off track toward graduation. Georgia State has 
incorporated these indicators into early alert systems, so faculty or 
staff can reach out if a student exhibits a red flag behavior, such as 
registering for the wrong class, getting a ``C'' in the first class in 
their major, or not registering at all. \14\mple has used their data to 
inform advisors about which students are at-risk for what reasons, so 
advisors have the information they need to serve students well. \15\
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    \14\  Collins, S. (2016). Big dreams, big data. Georgia State 
University Magazine. Retrieved from: http://news.gsu.edu/2017/11/15/
big-dreams-data/
    \15\  Ajinkya, J. & Moreland, M. (2015). Driving toward greater 
postsecondary attainment using data, Chapter 4: How to use student-
level data to improve postsecondary student outcomes. Retrieved from: 
http://guidebook.ihep.org/data/chapter/four/
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    To spur systemic change, though, institutions also must evaluate 
trends in their data. Take Florida State University (FSU), for example. 
Leadership at FSU developed attrition charts that identified patterns 
in attrition rates for students of different demographics. They found 
that while white, non-Pell recipients followed the trends many expect--
those who drop out do so in the first year--other student groups 
followed very different patterns. \16\ Some low-income Latina students, 
for instance, were dropping out later in their college careers, even 
though they were in good academic standing. Administrators investigated 
the trend further and found that many Latina students had family 
obligations far from campus, and those commitments were making it 
difficult to complete their studies. To alleviate this challenge, the 
university implemented a bus service to run from Tallahassee to Miami 
every Friday, returning to campus on Sunday night so students could 
manage family commitments and get back to class. Data uncovered a trend 
that enabled administrators to enact an equity-centric solution.
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    \16\  Engle, J. (2012). Replenishing opportunity in America: The 
2012 midterm report of public higher education systems in the Access to 
Success initiative, Florida State University. Retrieved from: http://
edtrust.org/wp-content/uploads/2013/10/2012--A2S--Case--Study--
Florida--FINAL.pdf
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    Building strong Federal data systems that compile the data needed 
at the national level will alleviate compliance burdens on 
institutions, allowing more of them to undertake these types of robust 
analyses at the campus level, analyses that can have immediate impacts 
on students' lives. Institutions have the power to use detailed data to 
remove barriers for students, and better designed Federal data networks 
can free up institutional capacity to do just that.
       The problem: Our current postsecondary data infrastructure
    The current puzzle that is our postsecondary data infrastructure is 
duplicative, inefficient, cumbersome, and worst of all--it does not 
allow key constituents to answer pressing questions about today's 
higher education system. Composed of IPEDS, multiple data systems 
within the Office of Federal Student Aid, state longitudinal data 
systems, private data collections, workforce data held by multiple 
Federal and state agencies, and more, the system is a complex maze 
riddled with holes.
    For instance, IPEDS serves as the primary public tool for 
collecting and reporting data on higher education. However, IPEDS is an 
aggregate data collection, meaning more than 7,000 institutions must 
use student-level data to calculate and report individual metrics. 
Making a change to IPEDS requires defining a new metric, providing 
detailed reporting instructions to institutions, and then each of those 
7,000 plus institutions must calculate and report the new metric. As a 
result, changes are slow, and many students remain missing or invisible 
in IPEDS metrics. For example, the graduation rates in IPEDS only 
measure the percentage of first-time, full-time students who complete 
their degree or credential at their first institution within 6 years. 
It leaves out part-time students, transfer-in students, and does not 
count outward transfer as an outcome--a particular problem for 
community colleges. As a result, these first-time, full-time graduation 
rates that are so often relied upon only reflect about half (47 
percent) of today's entering students. \17\
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    \17\  IHEP analysis of IPEDS 2015 data.
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    New Outcome Measures in IPEDS help remedy this problem by 
collecting completion information for part-time and transfer students, 
but they are not disaggregated by race/ethnicity, making it impossible 
to evaluate questions of equity. Also, while these measures count 
outward transfers, they do not report the type of institution a student 
transferred to. As a result, community college students still do not 
know their chance of transferring from a community college to a 4-year 
program, nor do they have any information about their chance of 
completing a degree after transfer. \18\
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    \18\  Institute for Higher Education Policy (2017). An evolution of 
measuring student outcomes in IPEDS. Retrieved from: http://
www.ihep.org/postsecdata/data-at-work/new-postsecdata-explainer-
student-outcome-metrics-ipeds
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    Compared with IPEDS, student-level data reporting is less 
burdensome and more adaptable to a changing higher education landscape. 
The Office of Federal Student Aid at the Department of Education (ED) 
collects student-level data on students who receive Title IV financial 
aid, and ED has used those data to answer questions about student debt, 
loan repayment, and earnings. \19\ Because ED had student-level data, 
the agency was able to explore metric definitions and make informed 
decisions about data quality and appropriate specifications for public 
reporting. Also, those data on aided students were matched to earnings 
information held by the Department of Treasury (Treasury). This data 
match is promising, yet incomplete. Because it is based only on FSA 
data, it leaves out non-aided students, an issue that is discussed in 
greater detail below.
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    \19\  Executive Office of the President of the United States. 
(2015). Using Federal data to measure and improve the performance of 
U.S. institutions of higher education. Retrieved from https://
collegescorecard.ed.gov/assets/
UsingFederalDataToMeasureAndImprovePerformance.pdf; Miller, B. (2016). 
Building a student-level data system. Institute for Higher Education 
Policy. Retrieved from http://www.ihep.org/sites/default/files/uploads/
postsecdata/docs/resources/building--a--student-level--data--system.pdf
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    The aggregate IPEDS reporting and the incomplete linkages between 
ED and Treasury offer just two examples of the cumbersome, inefficient, 
and incomplete data systems that compose our national postsecondary 
data infrastructure. Because of these inefficiencies, efforts to drive 
informed decisionmaking are stalled. So how can Federal policymaking 
help fix these problems, answer key questions about higher education, 
and make the puzzle pieces fit? By identifying the data to collect and 
designing an infrastructure to collect them.
                     Metrics: What data to collect?
    First, policymakers must determine what should be measured. 
Equitable access and success in higher education relies on information 
that reflects the higher education experience of all students at all 
institutions, yet many of today's students are missing or invisible in 
current data systems. For example, data on graduation rates 
historically have been limited to first-time, full-time students, data 
on employment outcomes are limited either to Federal aid recipients or 
students who do not cross state boundaries, and cost, financial aid, 
and outcome metrics are not always disaggregated by race/ethnicity or 
socioeconomic status.
    Without more consistent metrics, progress toward equity and success 
for all students is quite simply stagnated--prospective students and 
policymakers will continue to be forced to make key decisions without 
sufficient information. To advance the goals of social mobility and 
equity, we need a key set of comprehensive and comparable metrics that 
answer these critical questions about who attends college, who succeeds 
in and after college, and how college is financed. Specifically, the 
answers must provide information on how underserved students fare.
    Over the past decade institutions and states have recognized the 
need for better data. As a result, many created and joined voluntary 
data initiatives to collect better information to inform institutional 
improvement, consumer information, and policymaking efforts. At IHEP, 
we reviewed the details of these initiatives and found a great deal of 
agreement about what is important to measure. In Toward Convergence: A 
Technical Guide for the Metrics Framework, we categorize and define a 
set of about 30 metrics and 10 disaggregates that states and 
institutions find important in measuring college access, progression, 
completion, cost, and outcomes (see Table 1).
    These metrics measure performance, efficiency, and equity, and are 
designed to offer insights to institutions to help them improve. Some 
of these metrics are not collected at the Federal level at all, and 
some, such as enrollment or graduation rates, are collected already at 
the Federal level in ways that fail to include all students. The 
proposed definitions underlying the Framework in Table 1 are intended 
to refine metrics to count all students, all institutions, and all 
outcomes. Given the field's convergence on these metrics, they should 
be incorporated into government data systems, filling information gaps 
and answering unanswered questions about student success and equity.
               Table 1: A Field-Driven Metrics Framework
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    Any accountability systems--whether market-driven, government-
designed, or accreditor-led--should rely on quality metrics, such as 
the ones in Table 1. When designing accountability systems, 
policymakers should select metrics that align with ultimate policy 
objectives, model the impacts of proposed policies before legislating, 
and anticipate and protect against unintended consequences.
    Consider, for instance, discussions about the use of cohort default 
rates (CDRs) or repayment rates (RRs) in Federal accountability. 
Neither metrics is wholly ``better'' than the other. Rather, each 
metric measures something different and has its own strengths and 
limitations.
      CDRs are a short-term measure of default. They give 
policymakers and institutional leaders a critical look at students' 
risk of bearing the most damaging outcome of taking on student debt: 
default. By virtue of what they measure, CDRs incent institutions to 
keep a watchful eye on vulnerable students at risk of this life-
altering outcome. However, CDRs have limitations. They only measure 
default within a 3-year window, with the latest data showing that about 
12 percent of students default on their Federal loans within 3 years. 
\20\ Recent research, however, projects that nearly 40 percent of 
students may default within a 20-year window. \21\ Furthermore, 
institutions can influence CDRs by encouraging borrowers to enter 
deferment or forbearance to delay default, even if those options are 
not in students' best interest. These limitations are real, should be 
understood, and where possible steps should be taken to mitigate them. 
However, they do not negate the value of the measure itself. \22\
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    \20\  U.S. Department of Education (2014). FY2014 Official Cohort 
Default Rate Briefing. Retrieved from: https://ifap.ed.gov/
eannouncements/attachments/FY2014OfficialCDRBriefing.pdf
    \21\  Scott-Clayton, J. (2018). The looming student loan default 
crisis is worse than we thought. Retrieved from: https://
www.brookings.edu/research/the-looming-student-loan-default-crisis-is-
worse-than-we-thought/
    \22\  Janice, A. & Voight, M. (2016). Making sense of student loan 
outcomes: How using repayment rates can improve student success. 
Retrieved from: http://www.ihep.org/research/publications/making-sense-
student-loan-outcomes-how-using-repayment-rates-can-improve
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      RRs measure borrower progress in repaying their Federal 
loans and have been proposed as a replacement to CDRs. RRs are a 
valuable metric that provide a more nuanced understanding of borrower 
success in retiring debt because they capture as negative outcomes 
borrowers who are avoiding default, but not making progress in paying 
down loan principal. In this sense, repayment rates focus policymaker 
and institutional attention on struggling borrowers who are not seeing 
the desired return on their educational investment, even though their 
situation may not be quite as dire as those facing default. \23\
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    \23\  Janice, A. & Voight, M. (2016). Making sense of student loan 
outcomes: How using repayment rates can improve student success. 
Retrieved from: http://www.ihep.org/research/publications/making-sense-
student-loan-outcomes-how-using-repayment-rates-can-improve
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    Both of these metrics are valuable at measuring different things, 
and each focuses decisionmakers' attention in different ways, so they 
should not be pitted against each other as an either/or choice. Indeed, 
this example shows how multiple high-quality measures can work in 
concert with each other to inform complex decisionmaking for students, 
policymakers, and institutions.
       The solution: Fixing our postsecondary data infrastructure
    The voluntary initiatives, like Complete College America and 
Achieving the Dream, mentioned above have illuminated data gaps and 
proven that it is possible to collect better data. However, they do not 
serve as a replacement for data collection at the Federal and state 
levels. By their nature, these initiatives are voluntary, so they do 
not include information on all institutions. When faced with life-
altering, expensive college decisions, students should not have to rely 
upon voluntary reporting or search through more than a dozen 
initiatives to find the information they need. Furthermore, it is 
burdensome for institutions to participate in multiple voluntary 
initiatives. We must learn from these initiatives and use their 
experiences to implement a more permanent and effective policy 
solution.
    As evidenced by the voluntary initiatives, the inability to answer 
critical questions and collect the metrics outlined above comes not 
from a lack of data, but rather from policy barriers that prevent 
existing postsecondary data systems from being linked. Integrating 
existing Federal, state, and institutional data sources into a more 
coherent, nimble, secure, and privacy-protected network would create 
more usable information that could help students navigate the complex 
higher education marketplace. This type of network also is crucial to 
produce the information necessary to evaluate and meet workforce 
demands, to identify and close equity gaps in our postsecondary system, 
and to inform policy design.
    Agreement is growing around the best way to modernize our Nation's 
postsecondary data infrastructure. Through the Postsecondary Data 
Collaborative, IHEP engaged with organizations representing 
institutions, states, students, employers, and privacy and security 
experts to explore options for improving our Nation's postsecondary 
data infrastructure. \24\ This research found that the best approach to 
producing the information necessary to answer students' questions is to 
develop a secure, privacy-protected postsecondary student-level data 
network. \25\ In fact, members of both the Senate and the House have 
introduced the bipartisan College Transparency Act to create such a 
network housed at the National Center for Education Statistics (NCES). 
\26\ More than 130 organizations, representing students, institutions, 
veterans, college access providers, and employers, have publicly 
endorsed the College Transparency Act out of a recognition that this 
system would create a more functional postsecondary marketplace that 
serves all students. \27\ This type of system would:
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    \24\  Institute for Higher Education Policy. (2015). Envisioning 
the National Postsecondary Data Infrastructure in the 21st Century 
(paper series). Retrieved from http://www.ihep.org/postsecdata/mapping-
data-landscape/national-postsecondary-data-infrastructure
    \25\  Rorison, J. & Voight, M. (2015). Weighing the options for 
improving the national postsecondary data infrastructure. Institute for 
Higher Education Policy. Retrieved from http://www.ihep.org/sites/
default/files/uploads/docs/pubs/weighing--the--options--for--
improving--the--national--p ostsecondary--data--infrastructure----
september--2015.pdf
    \26\  Student Right to Know Before You Go Act, S.1195, 114th 
Congress (2015). Retrieved from https://www.Congress.gov/bill/114th-
congress/senate-bill/1195; Student Right to Know Before You Go Act, 
H.R.2518, 114th Congress (2015). Retrieved from https://
www.Congress.gov/bill/114th-congress/house-bill/2518; College 
Transparency Act, S.1121, 115th Congress (2017). Retrieved from https:/
/www.Congress.gov/bill/115th-congress/senate-bill/1121; College 
Transparency Act, H.R.2434, 115th Congress (2017). Retrieved from 
https://www.Congress.gov/bill/115th-congress/house-bill/2434
    \27\  Postsecondary Data Collaborative (2017). Postsecondary Data 
Collaborative and Workforce Data Quality Campaign applaud bipartisan, 
bicameral College Transparency Act. Retrieved from: http://
www.ihep.org/press/opinions-and-statements/postsecondary-data-
collaborative-and-workforce-data-quality-campaign
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      Empower all students to make more informed choices about 
where to spend their precious time and money,
      Be used to help students,
      Protect student privacy,
      Adhere to best practices in data security,
      Reduce reporting burden for colleges and universities by 
replacing the student components of IPEDS,
      Better steward taxpayer dollars,
      Uncover equity gaps so colleges and universities can 
change policies and practices to better serve underrepresented 
students, and
      Align education with labor market demand and help 
employers identify programs that are effectively preparing students for 
the workforce.
    Such a network would be limited in scope to answer only questions 
of national interest about college access, progression, completion, 
cost, and outcomes. Other systems, such as institutional data systems 
and state longitudinal data systems would still be necessary to answer 
more detailed questions specific to localized needs.
    Student protection must be at the heart of any data system. It must 
protect their privacy alongside their right to information, while 
securing their data using industry leading protocols, such as those 
developed by the National Institute for Standards and Technology (NIST) 
and by the International Organization for Standardization (IOS) and the 
International Electrotechnical Commission (IEC). \28\rong data 
governance structures should minimize the data collected, ensure all 
data are used in compliance with the law, provide notice to students of 
the collection, prohibit the sale of data or use of the system for law 
enforcement, issue penalties for misuse, conduct periodic audits, limit 
disclosures, especially of personally identifiable information, and 
craft provisions to handle a breach. Data should be used only to help, 
and never to harm students or limit opportunity, and this principle 
should serve as the foundation of all governance policy. IHEP's report, 
A Blueprint for Better Information: Recommendations for a Federal 
Postsecondary Student-Level Data Network, details recommendations for 
building strong data governance policies.
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    \28\  Grama, J.L. (2016). Understanding information security and 
privacy in postsecondary education data systems. Institute for Higher 
Education Policy. Retrieved from http://www.ihep.org/sites/default/
files/uploads/postsecdata/docs/resources/information--security--and--
privacy.pdf
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               Why should the Federal Government act now?
    In 2015-16, the Federal Government disbursed more than $157 billion 
in Federal student aid, \29\d it needs better information to 
steward that taxpayer investment. Furthermore, at kitchen tables around 
the country, students like Ava are wrestling with life-changing 
postsecondary decisions, making choices with their families about where 
to go to college, what to study, and how to pay for it. Today they make 
those decisions in an unbalanced marketplace with limited access to 
information. For the marketplace to function effectively, all students 
need access to high-quality information to help them make postsecondary 
decisions. The same information is needed to help state and Federal 
policymakers and college and university educators implement policies 
and practices to help more students succeed, especially low-income 
students and students of color.
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    \29\  Baum, S., Ma, J., Pender, M., & Welch, M. (2017). Trends in 
student aid 2017. The College Board. Retrieved from https://
trends.collegeboard.org/sites/default/files/2017-trends-student-aid--
0.pdf
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                  Federal Government's Unique Position
    The Federal Government is uniquely positioned to compile that 
information--even if non-Federal entities disseminate it. For example, 
consider how valuable the weather app on your phone is. I know I use 
mine daily to make decisions, such as what to wear and whether to walk 
to work or take the bus. These decisions are important, but the 
decision of where to go to college or what to study is a much higher 
stake decision. Even privately developed weather apps are primarily 
made possible by data from the National Oceanic and Atmospheric 
Association's National Weather Service, housed at the U.S. Department 
of Commerce. The data are made available to non-governmental experts to 
translate into information for public use. Just as the Federal 
Government is uniquely positioned to compile weather data because it 
has access to satellites, for example, it also is the best option for 
compiling data on education and the workforce--given the information it 
already holds.
                   Federal Data on Workforce Outcomes
    The Social Security Administration (SSA) and Internal Revenue 
Service (IRS) hold administrative data on employment outcomes for 
essentially all workers. \30\ fact, the Federal Government is the only 
entity with such comprehensive wage record data, making it the best 
source of workforce outcome information for colleges and universities.
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    \30\  Zinn, R. (2016). Classroom to career: Leveraging employment 
data to measure labor market outcomes. Institute for Higher Education 
Policy. Retrieved from http://www.ihep.org/sites/default/files/uploads/
postsecdata/docs/resources/leveraging--employment--data--0.pdf
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    Many states currently report workforce outcome data by linking 
education data to unemployment insurance (UI) records. However, these 
UI records--and the metrics they generate--are limited because they 
omit Federal employees, military employees, the self-employed, and 
people who move across state lines. \31\ Consider a state like 
Virginia, for example, where many residents work just across the state 
border in Maryland or Washington, DC, and many residents work for the 
Federal Government. Federal sources fill these gaps by relying on tax 
records for people nationwide, regardless of where they study, live, or 
work.
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    \31\  Zinn, R. (2016). Classroom to career: Leveraging employment 
data to measure labor market outcomes. Institute for Higher Education 
Policy. Retrieved from http://www.ihep.org/sites/default/files/uploads/
postsecdata/docs/resources/leveraging--employment--data--0.pdf
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    To be sure, these workforce data are highly sensitive and must be 
closely secured. To provide the aggregate institution and program-level 
information that students, policymakers, and institutions need, the 
personally identifiable information (PII) on earnings should never be 
shared externally and never even needs to be shared with ED. ED would 
send student-level data organized in program and institution-level 
cohorts to the Department of Treasury to link with individual-level 
data on wages. Treasury would calculate the results for specific 
programs and institutions and share the aggregate information back with 
ED. The College Scorecard already uses this information-exchange 
process to calculate employment outcomes for students who receive 
Federal financial aid.
    These data are illustrative of the value such information can 
provide, but the Scorecard's employment metrics should be improved in 
two ways. First, future efforts should report employment data at the 
program-level, rather than only the institution-level because 
employment outcomes vary by program even within institutions. \32\ 
Second, improved data metrics and data systems must include students 
who do not receive Federal aid, as discussed below.
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    \32\  Schneider, M. (2014). Measuring the economic success of 
college graduates: Lessons from the field. American Institutes for 
Research. Retrieved from http://www.ihep.org/sites/default/files/
uploads/postsecdata/docs/resources/leveraging/--employment--data--
0.pdf/http://www.air.org/sites/default/files/downloads/report/
Measuringpercent--thepercent--Economicpercent--Successpercent--
0Collegepercent--Graduates--Markpercent--Schneider.pdf; Carnevale, 
A.P., Cheah, B. & Hanson, A.R. (2015). The economic value of college 
majors. Georgetown University Center on Education and the Workforce. 
Retrieved from https://cew.georgetown.edu/wp--content/uploads/The-
Economic-Value-of-College-Majors-Full-Report-Web.compressed.pdf
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                         Counting All Students
    Existing employment metrics only include students who received 
Federal Title IV financial aid because ED only has data on these 
students in NSLDS, and statutory barriers prevent ED from collecting 
student-level data on non-Title IV students. However, data on aided and 
non-aided students are essential to answer critical questions about our 
higher education system for several reasons:
      1. All students--regardless of whether they receive 
Federal aid--deserve quality information on education and employment 
outcomes to help them make informed decisions. Only the Federal 
Government has access to complete earnings information, so 
institutions, states, and private entities cannot answer questions 
about workforce outcomes as accurately as the Federal Government. To be 
useful in a variety of contexts, workforce outcomes must include all 
students.
      2. About 30 percent of students do not receive Federal 
financial aid, \33\d in some institutions and systems, even 
greater proportions of students do not receive Federal aid. Consider 
the California Community College System, where about 20 percent of 
beginning students received Pell Grants and 2 percent received Federal 
loans in 2016-17. Omitting non-federally aided students leaves out 
about three-quarters of students (more than 1.5 million) in this large 
system because many students forgo applying for Federal aid. \34\ 
metrics are calculated on only a subset of students--those receiving 
Title IV aid--then the results will be skewed. Just as first-time, 
full-time graduation rates do not paint a complete picture of 
completion, neither do metrics limited to Title IV recipients. Both 
students and institutions deserve information that reflects the full 
student body.
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    \33\  Executive Office of the President of the United States. 
(2015). Using Federal data to measure and improve the performance of 
U.S. institutions of higher education. Retrieved from https://
collegescorecard.ed.gov/assets/
UsingFederalDataToMeasureAndImprovePerformance.pdf
    \34\  IHEP analysis of California Community Colleges Chancellor's 
Office data. Retrieved from: http://datamart.cccco.edu/Services/
FinAid--Summary.asp
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      3. Institutions as a whole, and all of their students, 
benefit from taxpayer investment through Title IV aid and Federal 
higher education subsidies. As such, outcomes data should reflect the 
entire institution, not simply a fraction of its students.
      4. Non-Title IV recipients also reap the benefits of 
Federal investment in higher education. All tuition-paying students can 
claim education tax benefits, and in fact, the IRS already holds some 
data on essentially all students based on the 1098-T form, \35\ich is 
used to process education tax credits and deductions. \36\
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    \35\  Bergeron, D.A. (2016). Leveraging what we already know: 
Linking Federal data systems. Institute for Higher Education Policy. 
Retrieved from http://www.ihep.org/sites/default/files/uploads/
postsecdata/docs/resources/linking--Federal--data--systems.pdf
    \36\  Internal Revenue Service. (2016, September 23). Form 1098-T, 
Tuition Statement. Retrieved from https://www.irs.gov/uac/form-1098-t-
tuition-statement
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      5. Non-Title IV students must be included in a student-
level data collection if it is to replace the student components of 
IPEDS and reduce burden on institutions. Many metrics in IPEDS, such as 
graduation rates and enrollment figures, include aided and non-aided 
students.
      6. To promote equity and champion civil rights, data must 
allow policymakers and institutions to identify and close socioeconomic 
gaps in college access, success, and outcomes. To accomplish this, we 
need quality information on low-income students (i.e., Pell Grant 
recipients) and non-low-income students (i.e., students who do not 
receive Federal aid).
                               Conclusion
    Our country was built in part on the idea that, with hard work and 
a good education, any American can climb the ladder of social and 
economic mobility. And by 2020, there will be 55 million new job 
openings, \37\oviding the very economic opportunity that can help our 
cities and communities thrive. Nearly two-thirds of all jobs will 
require some postsecondary education and training. \38\
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    \37\  Carnevale, A.P., Smith, N., & Strohl, J. (2013). Recovery: 
Job growth and education requirements through 2020. Georgetown 
University Center on Education and the Workforce. Retrieved from 
https://cew.georgetown.edu/wp-content/uploads/2014/11/
Recovery2020.FR--.Web--.pdf
    \38\  Carnevale, A.P., Smith, N., & Strohl, J. (2013). Recovery: 
Job growth and education requirements through 2020. Georgetown 
University Center on Education and the Workforce. Retrieved from 
https://cew.georgetown.edu/wp-content/uploads/2014/11/
Recovery2020.FR--.Web--.pdf
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    Each day, millions of Americans are wisely investing in their 
futures by acquiring new knowledge and skills in college classrooms and 
are working hard to climb that ladder.
    Senators, you are entrusted to responsibly steward taxpayer dollars 
and make sound investments to help students access and succeed in our 
higher education system. Certainly, you should act on the quality data 
you do hold now, like information on student loan outcomes. But as you 
consider your responsibility and seek to hold institutions accountable 
to taxpayer dollars, I ask you to consider the key questions you cannot 
currently answer and the appropriate means for gathering and sharing 
that information.
    A secure, privacy-protected student level data network would 
address the shortcomings of our current system by producing the 
information necessary to inform policymakers' decisions.
    Before Ava decides exactly where to invest her time and resources, 
she and millions of others just like her deserve answers to these same 
questions.
    As you work to reauthorize HEA, consider the questions you cannot 
answer. Consider your role in protecting students and taxpayers. And 
consider the student whose college choice will define her future. Now 
is the time to act. Now is the time to answer unanswered questions. Now 
is the time to tighten the rungs of the ladder of economic mobility.
    Thank you.
                                 ______
                                 
                  [summary statement of mamie voight]
    The research is abundantly clear: investing in a college education 
pays off. \1\ But while college is often a worthwhile investment, 
students, policymakers, and institutions cannot answer crucial 
questions about which programs at which institutions provide an 
adequate return on this investment, and for which students. This 
failure to answer key questions hampers policymaker efforts to design 
and implement accountability systems that manage the risk to taxpayers 
and students.
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    \1\  Ma, J., Pender, M., & Welch, M. (2016). Education Pays 2016. 
The College Board. Retrieved from https://trends.collegeboard.org/
sites/default/files/education-pays-2016-full-report.pdf
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    Those risks are real, especially for the most vulnerable students 
with the most to gain from a higher education, but also the most to 
lose if things go wrong. College is a pathway out of poverty, yet where 
a student goes to college ultimately shapes her opportunity to climb 
those rungs. Outcomes vary dramatically across institutions and 
programs--even those enrolling similar types of students--so quality 
data about outcomes are necessary to illuminate those patterns in ways 
that can inform policymaker efforts to protect taxpayer dollars.
    Any accountability system--whether it be market-based 
accountability, bright-line indicators, incentive structures, or other 
systems--must be grounded in reliable evidence. This need for evidence 
holds regardless of who or what is driving the accountability system: 
student choice, the Federal Government, state governments, or 
accreditors.
    While some postsecondary data, such as information on the student 
loan program like cohort default rates and repayment rates, are 
relatively complete and of high-quality, much of our data on student 
outcomes are insufficient. Our system is data rich, but we are 
information poor, relying on a duplicative, inefficient, and cumbersome 
postsecondary data infrastructure designed for yesterday's college and 
yesterday's student. As a result, we cannot answer many basic questions 
about college access, success, price, and post-college outcomes.
    However, a solution exists. Members of both the Senate and the 
House have introduced the College Transparency Act, a bipartisan 
solution to create a secure, privacy protected student-level data 
network. More than 130 organizations, representing students, 
institutions, veterans, college access providers, and employers, have 
endorsed the College Transparency Act, which would publicly report 
aggregate institution and program-level outcomes to inform student, 
policymaker, and institutional decisions. Critically important, these 
aggregate outcomes would include information on all students, not only 
those who receive Federal aid. Counting all students is necessary to 
accurately reflect institution and program outcomes and to evaluate 
equity.
    Senators, you are entrusted to responsibly steward taxpayer dollars 
and make sound investments to help students access and succeed in our 
higher education system. Certainly, you should act on the quality data 
you hold now, such as information on student loan outcomes. But as you 
undertake your efforts to responsibly steward taxpayer dollars and 
provide students with the information they need to make decisions, I 
ask you to consider the key questions you cannot currently answer and 
urge you to implement sound policy that will advance the use of quality 
data and evidence.
                                 ______
                                 
    The Chairman. Thank you, Ms. Voight.
    Dr. Cruz, welcome.

   STATEMENT OF JOSE LUIS CRUZ, PH.D., PRESIDENT, HERBERT H. 
     LEHMAN COLLEGE, CITY UNIVERSITY OF NEW YORK, BRONX, NY

    Dr. Cruz. Chairman Alexander, Ranking Member Murray, and 
Members of the Committee, thank you for the opportunity to 
testify before you this morning on the critical issue of 
accountability in higher education.
    My name is Jose Luis Cruz, and I am the President of Lehman 
College of the City University of New York, a beautiful campus 
located in the proud, resilient borough of the Bronx. Our 
college serves approximately 13,000 undergraduate and graduate 
students in 90 degree programs, plus 12,000 students in 
certificate and workforce development programs. Fifty percent 
of Lehman undergraduates have a household income of $30,000 or 
less, 80 percent are students of color, and 41 percent speak a 
language other than English at home. Lehman's students embody 
the aspirations of over 140 ancestries and exhibit the drive of 
those who strive to make their life in the great city of New 
York.
    As the Committee moves to reauthorize the Higher Education 
Act, I hope you proceed in a thoughtful, purposeful, and 
bipartisan way that recognizes the fundamental American values 
that are at stake and that acknowledges that the resulting 
legislation will impact the America of tomorrow in ways as 
significant as the overhaul of the tax code, the 
reconceptualization of our health care system, and our 
immigration laws.
    We're here to discuss accountability and the role equity 
must play to ensure colleges help students of color and 
students from low-income families succeed. To better serve 
students, the new HEA should protect them from the tyranny of 
low expectations, defend their right to meet their full 
potential, and provide a level playing field as they work to 
improve their lot in life through a post-secondary education.
    We also need to remember that because the Higher Education 
sector is diverse, a Federal accountability system must be 
tailored to account for differences in institutional missions, 
student demographics, program objectives, and governance 
structures. But for the system to work, we need to have the 
courage to confront those who dare abuse it.
    We cannot forget that what schools do matters. Two schools 
serving very similar populations can have vastly different 
outcomes. My former school, Cal State-Fullerton, was just 
highlighted for having a graduation rate for Latino students 
that is 24 points higher than one of its peer institutions, the 
University of Texas-San Antonio, despite the fact that both are 
large, public, moderately selective Hispanic-serving 
institutions with comparable levels of Latino and low-income 
students.
    Fullerton's success was no accident. It was the result of 
very intentional action, and the impetus for that work was 
equity-focused accountability from institutional and state 
leaders. The imperative to focus on equity cannot be 
overstated. The original HEA passed in 1965, yet low-income 
students today are only just beginning to catch up to the rate 
their high-income peers enrolled in college were 40 years ago. 
One reason for this disparity in college going, a factor that 
also manifests itself in gaps in college completion, is that to 
this day, we as a country continue to give students from 
historically underserved communities less of the things they 
need.
    We give them less funding, less access to effective in-
field experienced teachers, and less access to a college or 
career-ready curriculum in advanced course work. Moreover, just 
the fact that low-income students and students of color who do 
enroll in college are far less likely to enroll in institutions 
where most students graduate and far more likely to enroll in 
those institutions, including in the for-profit sector, that 
graduate fewer of their students and create disproportionate 
debt.
    The good news is that designing an equity-focused 
accountability system is possible. Here are several 
recommendations.
    First, make sure equity matters in accountability metrics. 
Students who aren't measured don't count. If we want 
institutions to pay attention to the outcomes of low-income 
students and students of color, we must make the same shift our 
country has made in K-12 to demand disaggregated outcomes data. 
There should be minimum standards for the enrollment of Pell 
students, graduation rates, and loan repayment for all 
students, and by race and income. We need to couple increased 
expectations with focused investments and provide time for 
campuses to improve before any sanctions attach. The ASPIRE 
Act, sponsored by Senator Isakson and Senator Coons, follows 
this model.
    Second, work to provide focused investments in building the 
capacity of colleges to use evidence-based innovation, 
particularly for the two-and 4-year public institutions that 
serve the majority of America's students. You heard last week 
from my colleague about CUNY ASAP. Programs like that show what 
is possible with the right incentives and supports necessary to 
ensure that all students have equitable opportunities and 
outcomes in higher education.
    Finally, be unwavering in your commitment to protecting 
students and taxpayers from fraud and abuse. Congress must 
ensure that every dollar the Federal Government invests in 
higher education is used effectively, efficiently, and in the 
best interest of the increasingly diverse public. An equity-
focused accountability system for higher education can address 
this need and help improve student outcomes across the board by 
better serving our historically underserved low-income students 
and students of color.
    Thank you.
    [The prepared statement of Dr. Cruz follows:]
                  prepared statement of jose luis cruz
    Chairman Alexander, Ranking Member Murray, and Members of the 
Committee, thank you for the opportunity to testify before you this 
morning on the important issue of accountability in higher education.
    My name is Jose Luis Cruz, and I am the President of Lehman College 
of The City University of New York. Located in the storied and 
resilient borough of The Bronx, Lehman College serves as a driver of 
transformative change to approximately 13,000 undergraduate and 
graduate students across 90 degree programs, plus 12,000 students in 
certificate and workforce development programs. Fifty percent of Lehman 
undergraduates have a household income of $30,000 or less; 80 percent 
are students of color; and 41 percent speak a language other than 
English at home. Lehman's students embody the aspirations of over 140 
different ancestries and exhibit the drive of those who strive to make 
their life, in the world's greatest City, the city of New York.
    The perspectives I bring today have been shaped by my experiences 
as an undergraduate and graduate student who benefited from a quality 
public higher education thanks to the support of many Federal and state 
aid programs; a parent of five children--one who is currently 
completing her undergraduate degree in a public research institution 
and two who completed undergrad and grad degrees from private 
institutions within the past year; a faculty member and administrator 
at three large university systems; and a former vice president of 
Higher Education Policy and Practice at The Education Trust.
             On the Formidable Goal of HEA Reauthorization
    Before I present my thoughts about the equity implications of 
accountability and recommendations for how best to consider equity in 
accountability, I want to commend you, Mr. Chairman, and Ranking Member 
Murray, for convening this hearing to ``explore how Federal 
policymakers can modernize Federal higher ed accountability to better 
protect students and taxpayers and ensure schools provide students the 
opportunity to earn certificates and degrees that are worth the time 
and money students spend on them.''
    It is my position that to achieve this goal, the Committee must 
proceed in a thoughtful, purposeful, and bipartisan way that recognizes 
the fundamental American values that are at stake in the 
reauthorization of the United States Higher Education Act and 
acknowledges that the legislation that results today will impact the 
America of tomorrow in ways as significant as the overhaul of the tax 
code, the reconceptualization of our health care system, and the 
redesign of our immigration system.
    As it works to do so, it is my hope that the Committee will take 
the time to fully parse, discuss, and reach a shared understanding of 
the goal they are trying to meet--as my initial attempt to do so below 
suggests it is a formidable goal indeed.
    First, the Committee seeks to modernize Federal higher ed 
accountability. The use of the word modernize suggests an interest in 
adapting the Higher Education Act to better respond to the challenges 
and opportunities faced by our country's increasingly diverse 
population as it relates to our Nation's multisector system of higher 
education. This is a most worthy objective as there are certainly 
myriad areas ripe for intervention, ranging from data transparency, 
misaligned incentive structures, lack of effective controls for toxic 
programs, etc. But it is important that the objective behind the word 
modernize not be misconstrued to mean a broad, indiscriminate 
dismantling of the regulatory structure that is in place under the 
guise of ``less regulations lead to better outcomes'' mantra that is so 
pervasive in our political discourse. In seeking to remove the 
regulatory burden, I encourage the Committee to first ask if the right 
inducements and system dynamics are in place to avoid regrettable 
unintended consequences that could exacerbate what one can only hope 
are the unintended outcomes of our current system. Indeed, it's 
important to remember that many existing regulations were put in place 
to address real issues with low-quality institutions that leave 
students worse off than if they had never attended. While we should be 
thoughtful about the burden we are placing on good actors, protecting 
students must be our first priority in any and all regulations.
    Second, the Committee wants an accountability system that will 
better protect students and taxpayers. In my opinion, to better serve 
students, the new HEA should protect them from the tyranny of low 
expectations, defend their right to seek to meet their full potential, 
provide a level playing field as they work to improve their lot in life 
through postsecondary education, and recognize that institutions play a 
big role in determining whether or not a student completes college or 
defaults on her student loans. And that the best way to protect 
taxpayers is by not losing sight that the overall return on their 
investments in individual students and the postsecondary institutions 
that educate them are not only measured by the cost of the Federal 
student loan program, but also in terms of the contributions to the 
public good that students and institutions make.
    Third, the Committee wants a reauthorized HEA that will ensure 
schools provide students the opportunity to earn certificates and 
degrees that are worth the time and money students spend on them. To 
achieve this objective, in crafting the new HEA, the Committee should 
recognize that what schools do matters; that while the standards for an 
accountability system could be designed such as to apply for 
institutions across all sectors of higher ed, a differentiated set of 
inducements and controls is needed to account for differences in 
institutional missions, student demographics, program objectives, and 
governance structures; and that for the incentives and penalties 
contemplated in the HEA to be credible, we need to have the courage to 
confront those who are currently abusing our accountability system.
    The good news is that all of these considerations can be taken into 
account if the Committee views the hard, important work ahead through 
an equity lens. After all, as I indicated in my testimony to the U.S. 
House of Representatives Committee on Education and the Workforce on 
Feb. 7, 2017, if we are to preserve our democratic ideals, secure our 
Nation, and compete in the global economy, we must significantly 
improve postsecondary educational attainment. And because of current 
demographic and economic shifts, the only way we can do this is by 
ensuring quality higher education options are accessible and affordable 
to all members of our increasingly diverse population.
    Of course, in today's America this is easier said than done--mainly 
because of how inequitable policies and practices across each level of 
the educational pipeline have undermined our ability to fulfill our 
twin promises of opportunity and upward mobility for all who work hard 
to reach their full potential.
                         The Equity Imperative
    Since the original Higher Education Act (HEA) was passed in 1965, 
the U.S. has made substantial progress in college access. College-going 
rates have climbed for students from all economic and racial groups. 
Yet despite this progress, low-income students today are only just 
beginning to catch up to the rate their high-income peers enrolled in 
college over 40 years ago.
    One reason for this gap in college-going--a factor that also 
manifests itself in gaps in college completion--is that to this day, we 
as a country give students from historically underserved communities 
less of all the things they need: less funding; less access to 
effective, in-field, experienced teachers; less access to a college or 
career-ready curriculum; and less access to advanced coursework.
    Moreover, there's the fact that low-income students and students of 
color who do enroll in college are far less likely than other students 
to enroll in institutions where most students graduate and far more 
likely to enroll in the institutions, including those in the for-profit 
sector, that graduate few of their students and create disproportionate 
debt. \1\ These trends put students in a precarious position to 
successfully repay their student loan debt and emphasize the need to 
ensure colleges responsibly recruit, enroll, and graduate their 
students.
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    \1\  Ed Trust analysis of IPEDS Fall enrollment, Fall 2014 (by 
race) and NCES National Postsecondary Student Aid Study (NPSAS:12), 
2011-12 (by Pell recipient status).
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    These disparities are complicated further by the negative impact 
that increased institutional costs, state disinvestments (down 20 
percent since 1990), inequitable state financial aid programs, and 
insufficient maximum award levels in the Pell Grant program (down since 
its inception from roughly 75 percent of the cost of attending a public 
4-year college to 30 percent) have had on the total cost of attendance 
for our lowest income students. The net effect? Today, low-income 
students must find a way to finance an amount equivalent to 76 percent 
of their family's annual income to attend a public university for 1 
year, even after accounting for all grant aid--a far higher burden than 
the 17 percent figure required for the highest income students. \2\
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    \2\  Ed Trust analysis of NPSAS:12, using PowerStats. Results based 
on full-time, full-year, one-institution dependent undergrads at public 
and private nonprofit 4-year colleges.
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    These intergroup inequities have a profound impact on individual 
lives and our country's competitiveness. For every 100 white 
kindergartners, roughly 90 end up with a high school diploma, and, of 
those, 40 get at least a bachelor's degree. Plenty of opportunity for 
improvement, to be sure. But the bachelor's degree attainment rate 
among black adults is just over half that of white adults, and among 
Latino adults, only just over one-third. Similarly, students from high-
income families are approximately five times as likely as students from 
low-income families to obtain a bachelor's degree by age 24.
    It is because of the profound effect this state of affairs has on 
the ability of working families to succeed, the competitiveness of our 
economy, the security of our country, and the merit of our meritocracy, 
that I believe the eradication of intergroup inequities to be among the 
most important challenges that higher education institutions--and our 
nation--will face in the years ahead. To meet this challenge, we must 
develop, implement and scale equity-driven policies and practices that 
will restore faith in Horace Mann's articulation of education being 
``beyond all other devices of human origin. . .the great equalizer of 
the conditions of men, the balance-wheel of the social machinery.''
   A Reason for Hope: Similar Institutions, Similar Students, Vastly 
                          Difference Outcomes
    The good news is that--even under the current regulatory 
structure--there are many higher ed institutions that are bucking these 
trends, demonstrating that what institutions do matters in determining 
whether or not a student's demography will determine their destiny. 
Indeed, evidence suggests that similar students can have drastically 
different outcomes at campuses serving similar students with similar 
resources.
    For example, in The Education Trust's recent report on Latino 
student success, they found that two campuses, California State 
University-Fullerton and The University of Texas at San Antonio serve a 
student body that is nearly 40 percent Latino and nearly half low 
income; however there is an over 20 percentage point gap in their 
overall graduation rate. And what's interesting to note is that 
Fullerton's success was the result of intentional action, and the 
impetus for that work was equity-focused accountability from 
institutional and state leaders.
    I know this from first-hand experience as I served as the Provost 
and Vice President of Academic Affairs at Cal State Fullerton and am 
now using the experiences lived and lessons learned to guide my work as 
president of Lehman College of The City University of New York. And I 
know that it can be replicated, as my work with the Access to Success 
Initiative at the close of the past decade suggests.
    So, the question really is how do we infuse equity into the 
reauthorization of HEA to replicate these results? I am pleased to 
present the following recommendations for your consideration.
                            Recommendations
    First, I recommend that the Committee privilege equity in 
accountability metrics. If issues of equity are not intentionally 
addressed in policy design, outcomes and inequity may increase 
simultaneously. This is what we have seen happen in a number of states 
with performance-based funding where the lack of intentionality on this 
front when establishing financial incentives to hold campuses more 
responsible for student completion outcomes resulted in negative 
impacts on issues of equity, as campuses responded by becoming more 
selective in order to improve their outcomes
    Although most existing and emerging state policy proposals 
incentivize completion for Pell grant recipients as a way to address 
equity, there are additional considerations to ensure equity isn't just 
symbolic, but is a priority. Equity metrics should be mandatory, not 
optional and ensure equity measures are given their proper weight, so 
they are not perceived as an optional, or insignificant bonus on top of 
a rewards system that clearly prioritizes overall completion. And they 
should not be limited to income, which is unable to account for racial 
inequality. Students of color less likely to apply, persist, complete 
college, and are more likely to have unmet financial need, thus 
policies should include incentives for enrolling and graduating 
students of color. The Center for Postsecondary and Economic Success at 
the Center for Law and Social Policy (CLASP) suggests in the context of 
state Outcomes Based Funding that the weight of the equity measures 
should be sufficient to counteract the strength of the incentives to 
increase selectivity.
    In the ``Tough Love'' report, The Education Trust suggested that 
Federal accountability policy should redefine the standards, so that 
``low performing'' doesn't just mean low graduation rates, but also 
means an unacceptable effort to enroll and graduate low-income 
students. Ed Trust suggested reducing or eliminating financial 
investments in colleges that were in the bottom 5 percent of Pell 
enrollment. This idea was also incorporated into the ASPIRE Act, 
introduced by Senators Isakson and Coons, which suggested giving 
colleges time to improve Pell enrollment or pay a penalty that would be 
redirected to under-resourced colleges struggling to graduate their 
students.
    More recently, Georgetown's Center on Education and the Workforce 
suggested that selective campuses with the highest completion rates can 
afford to increase their enrollment of Pell Grant recipients to 20 
percent, a strategy they believe will increase outcomes for low income 
students.
    These increased expectations must be coupled with increased 
investment and time for campuses to improve. Institutions should also 
be provided with technical assistance and rewards or incentives for 
making improvements. It is especially important that these resources be 
targeted to campuses serving large proportions of low-income students 
that are making active efforts to improve completion rates. For 
institutions already on the right track when it comes to access and 
completion, new incentives-both financial and non-financial-can be 
provided.
    While there should be some consequence for a failure to improve, we 
must stop thinking about ``accountability'' as meaning all-or-nothing 
eligibility for Title IV aid, except in the most egregious cases of 
fraud and abuse. And we would do well to address the causes of 
regrettable outcomes, not just their symptoms.
    The system of higher education is extremely stratified; students 
who require the most support are concentrated at institutions with the 
fewest resources and the lowest completion rates. Thus, Federal 
accountability should be designed in way that considers campus type, 
resources, scope, size, and mission when defining institutional success 
and identifying peer groups. For example, limiting Title IV eligibility 
for institutions that may have low completion rates, but enroll larger 
proportions of low income students and students of color could have a 
major impact of higher education equity. Therefore using gradual 
sanctions like those suggested by The Institute for College Access and 
Success (TICAS), before Title IV eligibility loss, and providing 
support for improvement at at-risk institutions can ensure 
accountability policies enhance opportunities for students, rather than 
limit them.
    Often proposals, like risk sharing, aimed at holding institutions 
of higher education more responsible for poor outcomes and increasing 
costs, use students' ability to repay their student debt--as measured 
by cohort default and/or repayment rates--as a primary indicator of 
performance. These metrics are important because the student debt 
crisis has had a disproportionate impact on students of color, 
especially Black students who are nearly 20 percentage points more like 
to borrow student loans and Black Bachelor's degree holders are five 
time more likely to default on their student loans than White college 
dropouts. But the metrics simply describe the symptom. And as it turns 
out, in this case, rather than limit access to loans or repayment 
options, we'd do better by attacking the underlying causes. Namely, the 
facts that Black students disproportionately enroll in low-performing 
colleges, particularly for-profit institutions that have lower 
graduation rates and higher cohort default rates \3\ and that the 
strongest predictor of loan default is whether or not a student 
completes college. Thus, limiting the risk to taxpayers associated with 
our $1.3 trillion Federal loan portfolio is more about focusing on 
completion and strengthening protections for students against low-
quality, fraudulent and predatory for-profit institutions, and less 
about the protections we provide borrowers (e.g., income-based 
repayment plans).
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    \3\  Ed Trust analysis of IPEDS Fall enrollment, Fall 2014 (by 
race)
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    Second, I recommend that the Committee work to incentivize 
intentionality, unleash innovation, and reward success. Enrolling low 
income students and students of color is not an excuse for poor 
outcomes. As you look to reauthorize the Higher Education Act, you have 
a prime opportunity to provide the incentives and supports necessary to 
ensure that all students have equitable opportunity and outcomes in 
higher education. An equity-focused accountability is a key lever for 
making that change.
    There is evidence that certain student behaviors, such as taking 
summer courses, can increase their likelihood of completing their 
degree program. Federal policy can be designed in a way that 
incentivizes these behaviors, ultimately leading to increased college 
completion. For example, students who are able to work less and take 
more courses have better grades are more likely to complete college, 
than their peers who work more hours and take fewer courses. Therefore, 
outcomes driven policies should provide additional resources and 
incentives for students to take more credits, such as year-round Pell 
grants-which I am grateful Congress has reinstated--and financial aid 
that can be applied to non-tuition, living expenses to ensure students 
can afford to take more credits per semester and complete college at 
higher rates.
    Federal policy designed to increase college completion must invest 
in the capacity of campuses to better serve students, especially those 
that have the least resources, but maintain a commitment to educating 
the students least likely to complete college. This capacity building 
should be centered on campuses implementing evidence based strategies, 
such as those used by Georgia State University or in City University of 
New York's Accelerated Study in Associate Programs (ASAP), that are 
shown to improve student outcomes.
    The average campus leader can identify several practices that can 
improve completion, like co-requisite remediation, guided pathways, 
intrusive advising, and data-based decisionmaking, but often lack the 
financial or human capital needed to effectively implement these 
strategies. Implementing these strategies can improve student outcomes 
and ultimately save campuses resources that they can apply to 
sustaining and expanding these initiatives, however, many campuses 
require an initial investment to help them build the infrastructure and 
human capital needed to start the initiative.
    There are examples of emerging proposals, such as the ASPIRE Act 
that couples the introduction of increased accountability for 
completion, with focused investments in the capacity of campuses-
particularly those that are struggling but striving to improve--to 
implement effective strategies. I appreciate Senator Isakson's work on 
this legislation and hope to see Congress continue to explore its 
ideas. More broadly, Congress should also pursue additional investments 
in improvement targeted at campuses like community colleges and 
Minority Serving Institutions that serve large proportions of low 
income students and students of color, but also have limited 
institutional resources.
    Third, I recommend that the Committee be unwavering in its 
commitment to protect students and taxpayers from fraud and abuse. For 
proprietary colleges, this means they must deliver on the promises of 
success they are making to students and taxpayers alike. The promise is 
clear and unambiguous, seen in the recruitment ads depicting happy 
graduates working in state-of-the-art jobs they acquired thanks to 
their newly earned for-profit college degrees. The ads of course do not 
include the ``results are not typical'' or ``individual results may 
vary'' disclaimers we are accustomed to seeing when the exception, 
rather than the rule, is showcased. But, unfortunately, they do present 
the exception. The data show that rather than getting a relevant 
credential and a job that pays a living wage, too many students walk 
away from these institutions with nothing but excessive debt and, 
ultimately, blame for their institutions' low graduation and high loan 
default rates.
    On March 10, 2011, I testified before this Committee. I 
respectfully submit said testimony into today's record. At the time, I 
unequivocally stated that for-profit college companies demanded new 
attention and a new approach to regulation, because existing structures 
were ill-equipped to deal with the aggressive business models that 
fueled their growth.
    Since then, the implementation of the gainful employment rule, 
restrictions on incentive compensation, and enactment of borrower's 
defense have gone a long way to protecting taxpayers and students from 
the worst corporate offenders. But it is extremely worrisome to see the 
current Department of Education walk away from these protections when 
they should in fact be strengthening them.
    As part of this accountability conversation, we should be 
continuing these guardrails in addition to taking further steps such as 
requiring accreditation agencies to emphasize student outcomes and 
measures of academic quality and financial stability in their 
evaluations and accreditation decisions; and strengthening Federal aid 
eligibility requirements like the 90/10 rule so that for-profit 
institutions are not mostly publicly funded.
    We can't meet the high-skill workforce demands of tomorrow unless 
we cleanup the for-profit college sector today. We have to rein in 
those that abuse our social investment and prey on our underserved 
population.
    The Case for Investments in Public 2-year & 4-year Institutions
    Having been allowed to weigh in on the Committee's deliberations, 
it would be irresponsible of me to not use the occasion to remind its 
Members of the incredible opportunity the reauthorization of the Higher 
Education Act presents to unleash the transformative power of our 
country's public 2-year and 4-year institutions, the institutions that 
because of who and how many they serve, predominantly and 
disproportionately shoulder the responsibility of increasing 
educational attainment in America.
    Because, in my opinion the public 2-year and 4-year sector 
represents our country's best bet to once again lead the world in 
educational attainment. Particularly if we can find a way to build 
capacity within the sector so those institutions that are outperforming 
their peers, can model to others how they too can take more intentional 
action to better serve the millions of students who are coming of age 
in America today, but who--because of the color of their skin, the 
balance of their checking account, their place of origin, and/or the 
tenets of their faith--have historically been underserved as they have 
sought to meet their full potential.
    Imagine the benefits that would accrue from additional investments 
in institutions such as The City University of New York--which 
according to The Equality of Opportunity Project has propelled almost 
six times as many low-income students into the middle class and beyond 
as all eight Ivy League campuses, plus Duke, M.I.T., Stanford, and 
Chicago, combined--that would allow them to scale their best practices 
to accelerate progress on their goals to expand access, improve 
learning, increase graduation rates, reduce time to degree, and prepare 
students for meaningful employment and future study.
    I, for one, have a clear vision of what such investments would do 
for Lehman College: it would serve as a catalyst for the urgent action 
required to create the conditions whereby the promise of prosperity of 
a resurgent Bronx is within the reach of all those who seek to meet 
their full potential--action captured in our college's goal to double 
from 45,000 to 90,000 the number of high-quality degrees and 
credentials that lead to fulfilling careers and future education that 
we produce by the year 2030, an initiative we refer to as 90x30.
    This is no easy feat. The Bronx is moving forward and trending 
upward--median income levels are up and unemployment rates are at 
historic lows. But the borough's poverty rates are on the rise and not 
all families are positioned to benefit from our booming economy. The 
largest demographic living in poverty in the Bronx today? Females aged 
25-34. The income mobility rate for children in poor families? Among 
the lowest in the Nation. The growth rate of the school-age population 
in the borough? Among the fastest in the state. And at 28 percent, the 
Bronx is next to last in educational attainment of the 62 counties in 
New York State.
    The magnitude of this challenge could paralyze most. But imagining 
what a better educated Bronx would look like provides a powerful 
impetus for us to forge ahead.
    Now, the crisis of educational inequality is not a local issue. But 
to truly reverse existing inequities in higher education, we need 
equity-driven policies and practices that will allow those institutions 
who can disproportionately contribute to our national goals to advance 
their missions and meet their full potential as vehicles of social 
mobility and drivers of transformative in their communities.
                              Conclusions
    Accountability in higher education is not a new conversation, nor 
is it a partisan one. Many of the ideas presented herein and others 
that will surely be discussed today-including the importance of looking 
at outcomes in a disaggregated way by student group-have been discussed 
since the George W. Bush administration with the Spellings Commission. 
It is time for those conversations to ripen into policy action.
    Congress must ensure that every dollar the Federal Government 
invests in higher education is used effectively, efficiently, and in 
the best interest of the increasingly diverse public. It is clear that 
a thoughtful, equity-focused accountability system for higher education 
is both necessary to safeguard the money invested by the taxpayers, 
protect students from fraudulent and predatory institutions, and 
improve student outcomes across the board, but particularly for low-
income students and students of color.
    I believe that the reauthorization of the Higher Education Act can 
help institutions make it not only possible, but probable that more 
low-income students and students of color can rise to the middle class, 
paving the way for less inequality, more social mobility, and better 
overall prosperity in America. And, as I've stated herein, I believe 
that the best ways to do this are by applying an equity-lens to the 
policies and practices that shape the work of higher education 
institutions across our Nation and targeting resources to those 2-year 
and 4-year public institutions that have demonstrated the capacity to 
transform lives and communities.
    On behalf of Lehman College, please know that we welcome the 
opportunity to work with you and other institutions across the country, 
as we move to do the hard, but important work required to ensure that 
our higher education system works for all Americans.
    Thank you.
                                 ______
                                 
                 [summary statement of jose luis cruz]
    Chairman Alexander, Ranking Member Murray, and Members of the 
Committee, thank you for the opportunity to testify before you this 
morning on the critical issue of accountability in higher education.
    My name is Jose Luis Cruz, and I am the President of Lehman College 
of The City University of New York, located in the proud, resilient 
borough of The Bronx.
    We are here to discuss accountability and the role equity must play 
to ensure colleges help students of color and students from low-income 
families succeed. To better serve students, the new Higher Education 
Act (HEA) should protect them from the tyranny of low expectations, 
defend their right to seek to meet their full potential, provide a 
level playing field as they work to improve their lot in life through 
postsecondary education and recognize the critical role institutions 
play in a student's success.
    We also need to remember that the higher education sector is 
diverse and a Federal accountability system must be tailored to account 
for differences in institutional missions, student demographics, 
program objectives, and governance structures. But, for accountability 
to work, we need to have the courage to confront those who are 
currently abusing the system.
    The good news is that designing an equity-focused accountability 
system is possible. Here are several recommendations.
    First, equity must matter in accountability metrics. There should 
be minimum standards for the enrollment of Pell students, graduation 
rates, and loan repayment-for all students and by race and income. We 
need to couple increased expectations with focused investments and 
provide time for campuses to improve before any sanctions attach.
    Second, work to provide focused investments in building the 
capacity of colleges to use evidence-based innovation, particularly for 
the 2-and 4-year public institutions that serve the majority of 
America's students. You heard last week from my colleague about CUNY 
ASAP. Programs like that show what is possible with the right 
incentives and supports necessary to ensure that all students have 
equitable opportunities and outcomes in higher education.
    Finally, be unwavering in your commitment to protecting students 
and taxpayers from fraud and abuse.
    Congress must ensure that every dollar the Federal Government 
invests in higher education is used effectively, efficiently, and in 
the best interest of the increasingly diverse public. An equity-focused 
accountability system for higher education can address this need and 
help improve student outcomes across the board by better serving our 
historically underserved low-income students and students of color.
                                 ______
                                 
    The Chairman. Thank you, Dr. Cruz.
    Mr. Delisle, welcome.

   STATEMENT OF JASON D. DELISLE, RESIDENT FELLOW, AMERICAN 
              ENTERPRISE INSTITUTE, WASHINGTON, DC

    Mr. Delisle. Thank you. Chairman Alexander, Ranking Member 
Murray, and Members of the Committee, thank you for the 
opportunity to testify today about the student loan program, 
and costs and risks to taxpayers, and accountability policies.
    I want to say before I get started that my views today are 
my own. They are not the views of the American Enterprise 
Institute, which to the best of my knowledge doesn't have any 
views about student loans.
    Chairman Alexander, you already mentioned that the student 
loan program is large. It makes about $100 billion a year in 
loans, and this accounts for about 90 percent of all lending, 
college lending and higher education lending in the economy. 
There are no income limits, no means testing for the loans, and 
for graduate students there's not even a cap on the amount they 
can borrow. They can borrow up to the full cost of attendance, 
effectively no questions asked.
    In recent years we've had a big run-up in the amount of 
outstanding debt. There's $1.3 trillion in Federal student 
loans outstanding. Just to put that into context, that means 
the Federal student loan program now rivals the FHA's single-
family home mortgage program, making those two programs the 
largest Federal credit programs the government operates.
    So given the size of the Federal loan program, I think it's 
important that we really understand how much it costs, and 
getting a handle on those costs shows us that there is a need 
for policies that protect against waste, fraud, and abuse, and 
that borrowers who attend poorly performing schools and low-
quality schools and overpriced programs are going to struggle 
to repay their loans and increase costs imposed on taxpayers.
    So let me go through some of those costs.
    One is defaults. When students default on their loans, it 
costs taxpayers money. According to the Department of 
Education, it's about $4 billion a year. The reason why this 
costs money is the Department of Education, even though it's 
pretty good at getting the money back, it is still unable to 
recoup all of the costs that it incurs in collecting the money, 
and there is also a lot of time spent. So a dollar that you're 
owed today but is maybe collected 20 years from now isn't worth 
a dollar anymore.
    Now, we have the cohort default rate that, as 
accountability policy, sort of gets at this. But another big 
source of cost that's even larger than default that we really 
have no accountability policy aimed at is the cost of the 
income-based repayment program. So when students repay their 
loans using the income-based repayment program, payments are 
generally low relative to what would be required to fully pay 
off the loan. So the Department of Education estimates that a 
lot of students who are using this program are going to have 
their loans forgiven, and currently a lot of students are using 
this program. There is about $46 billion out of the $100 
billion lent each year that the Department of Education is 
expecting will be repaid to this program. That equates to about 
a $12 billion annual cost for income-based repayment, 
significantly larger than the cost of defaults, about three 
times.
    Another source of cost is from discharges due to fraud, 
closed schools. This is becoming more of an increasing issue. 
The Department of Education just wrote down the value of the 
outstanding loan portfolio by $5 billion because their 
estimates show that there's going to be more discharges due to 
closed schools and fraud and misrepresentation.
    Another source of cost is just the overall cost of the loan 
program. A lot of people believe that the loan program makes 
money for the government. The CBO puts out statistics that 
appear to show that this is the case. But the CBO, the 
Congressional Budget Office, also warns that these estimates 
``do not provide a comprehensive measure of what Federal credit 
programs actually cost the government and, by extension, 
taxpayers.'' So the agency has suggested a more comprehensive 
measure of cost called fair value accounting, and when the CBO 
uses that method they show the program is expected to cost at 
least $183 billion over the next 10 years. That's a very 
significant cost. So those who would say we can sort of turn a 
blind eye to accountability policies because the program 
doesn't lose money needs to look at the CBO's estimates 
according to fair value.
    In my testimony, my written testimony, I go through a 
number of principles that I think will help the Committee 
develop better accountability policies. I'm a little bit short 
on time and I won't go into them here, but I'll be happy to 
talk about them in some of the questions.
    Thank you. That concludes my testimony.
    [The prepared statement of Mr. Delisle follows:]
                 prepared statement of jason d. delisle
    Chairman Alexander, Ranking Member Murray, and Members of the 
Committee, thank you for the opportunity to testify about the risks and 
costs in the Federal student loan program and the need for 
accountability policies for higher education institutions.
    The Federal Government's Direct Loan program dominates the student-
loan market today, issuing 90 percent of all loans made across the 
country each year. Students pursuing everything from short-term 
certificates to master's degrees qualify for nearly $100 billion in 
loans every year at terms more generous than most private lenders would 
offer.
    The Federal role in higher-education lending has grown ever since 
lawmakers enacted the first loan program under the National Defense 
Education Act of 1958. The Higher Education Act of 1965 expanded access 
to loans to more colleges and students through the Guaranteed Student 
Loan Program, but the interest rate subsidies it provided were 
restricted to students from low-income families. In 1980, Congress 
created a loan program for parents of undergraduates (Parent PLUS), and 
then in 1992, eliminated annual and lifetime borrowing limits for those 
loans. That year, lawmakers also authorized the Unsubsidized Stafford 
Loan program, which allows all undergraduate students to borrow Federal 
loans regardless of their financial circumstances. In 2006, Congress 
created the Grad PLUS loan program, which removed limits on the amount 
graduate students could borrow. \1\ This expansion, along with rising 
college costs and increasing student enrollments, has led to a rapid 
increase in the stock of outstanding debt in recent years. Now at $1.3 
trillion, the student loan program rivals the Federal Housing 
Administration's largest mortgage program in size. \2\
---------------------------------------------------------------------------
    \1\  For more information about the history and expansion of the 
Federal student loan program, see: Jason D. Delisle, Private in Name 
Only: Lessons from the Defunct Student Loan Program, American 
Enterprise Institute, February 2017, www.aei.org/wp-content/uploads/
2017/02/Private-in-Name-Only.pdf.
    \2\  Board of Governors of the Federal Reserve System, ``Mortgage 
Debt Outstanding,'' March 2017, www.Federalreserve.gov/econresdata/
releases/mortoutstand/current.htm.
---------------------------------------------------------------------------
    Given the size and scope of the loan program, it is important to 
understand that the loan program imposes costs on taxpayers. Such costs 
speak directly to the need for policies that guard against fraud, 
waste, and abuse along with policies that provide information about 
loan performance. Borrowers who attend poor quality or overpriced 
programs will struggle to repay their debt and in turn impose losses to 
taxpayers.
        Loan-Based Accountability Policies and their Limitations
    In the early 1990's, Congress enacted its first loan-based 
accountability policy: the cohort default rate. The cohort default rate 
measures the share of an institution's former students who borrow 
Federal loans and default within 3 years of entering repayment. \3\ 
Institutions with high default rates lose eligibility for Federal 
student aid programs because lawmakers saw high default rates as a 
proxy for low-quality institutions of higher education.
---------------------------------------------------------------------------
    \3\  To be counted as a default in the cohort default rate, a 
borrower must miss making a payment for 360 days or more. For more 
information, see Cornell Law School, ``Calculating and Applying Cohort 
Default Rates,'' www.law.cornell.edu/cfr/text/34/668.202.
---------------------------------------------------------------------------
    The Obama administration's ``gainful employment'' regulations again 
sought to use loans as a proxy for value and quality, but in a 
different way. The initially proposed rule included a measure of 
whether borrowers who completed a particular program paid down 
principal on their student loans. The final rule does not include that 
measure but instead uses the amount of debt a student takes on 
(relative to his earnings) to gauge eligibility for Federal aid by 
program.
    Then there are proposals for a third loan-based accountability 
measure: risk sharing. These proposals--advanced by think tanks, 
researchers, advocates, and some lawmakers--would require institutions 
that pass the other measures of accountability to pay penalties to the 
Federal Government commensurate with the amount of loans that perform 
poorly. \4\
---------------------------------------------------------------------------
    \4\  Ben Miller and Beth Akers, ``Designing Higher Education Risk-
Sharing Proposals,'' Center for American Progress, May 22, 2017, 
www.americanprogress.org/issues/education-postsecondary/reports/2017/
05/22/432654/designinghigher-education-risk-sharing-proposals/.
---------------------------------------------------------------------------
    Despite the sound rationale for loan-based accountability policies, 
these measures still have limitations. By design they exclude all 
students in programs or institutions who do not borrow. Programs and 
institutions that mainly use Federal Pell Grants, and few loans, are 
also excluded from the accountability measure. This implies that there 
is not a need for accountability measures for grant aid or for students 
who pay out of pocket. If the accountability measure is supposed to 
prevent taxpayer resources from supporting overpriced and low quality 
programs--or protect consumers from squandering their time and limited 
Federal aid--then focusing accountability only on loan performance 
falls short of that goal.
    Even the loan-based metrics themselves are imprecise. While 
defaulting on a student loan is clearly a bad outcome, policymakers 
should be careful when interpreting that event as a signal that 
borrowers' debts are unaffordable, that their earnings are low, or 
both. Data suggest that about one in seven borrowers with incomes 
between $60,000 and $70,000 default within 4 years of entering 
repayment. \5\ That is a high default rate for borrowers who do not 
appear to have low incomes.
---------------------------------------------------------------------------
    \5\  Constantine Yannelis, ``Strategic Default on Student Loans'' 
(working paper, New York University, New York City, 2016), http://
faculty.chicagobooth.edu/workshops/financelunch/past/pdf/Strategic 
percent20Default.pdf.
---------------------------------------------------------------------------
    While those figures suggest default rates may overstate what the 
accountability metric seeks to measure, benefits in the loan program 
that allow borrowers to postpone payment and avoid default can 
understate the extent to which an institution's students are 
struggling. Recent research shows that lifetime loan default rates are 
much higher than the rates captured in the 3-year cohort default rate 
window. \6\
---------------------------------------------------------------------------
    \6\  Jennie H. Woo et al. ``Repayment of Student Loans as of 2015 
Among 1995--96 and 2003--04 First-Time Beginning Students,'' (National 
Center for Education Statistics, 2017), https://nces.ed.gov/pubs2018/
2018410.pdf.
---------------------------------------------------------------------------
    Another limitation comes from the income-based repayment programs. 
Borrowers can enroll in income-based repayment options that allow them 
to pay down debt slowly. In some cases they may never have to make 
payments on the loan if their incomes are low enough. These borrowers 
would be avoiding default despite making no payments. Meanwhile, the 
highest default rates occur among borrowers with post-enrollment 
incomes between $10,000 and $20,000--income levels at which most 
borrowers would qualify for $0 payments under income-based repayment if 
they enrolled. \7\ Using loan repayment rates like the Obama 
administration's original gainful employment regulation might be more 
precise for overcoming that limitation, but that metric entails other 
limitations. For example, educational programs that lead to careers in 
public service may be more likely to exhibit low repayment rates as 
their graduates may be more likely to enroll in income-based repayment 
plans. Some policymakers, however, may not consider those educational 
programs to be of poor quality or low value despite the low repayment 
rates.
---------------------------------------------------------------------------
    \7\  Ibid., 36.
---------------------------------------------------------------------------
              The Cost and Risks of Federal Student Loans
    Keeping these limitations in mind, my testimony will now detail how 
the loan program imposes costs and risks on taxpayers to illustrate why 
accountability policies are necessary. While my discussion focuses on 
costs, this is not to suggest that loan program is not valuable for 
students and the economy as a whole. Generally, I believe a well-
designed Federal student loan program plays an important role in our 
higher education system and is worth the budgetary costs.
    However, my goal today is to focus on the cost side of that cost-
benefit analysis.
    My testimony today examines the loan program by looking at four 
categories of costs: loan defaults; Income-Based Repayment and loan 
forgiveness programs; loan discharges for fraud and closed schools; and 
last, comprehensive budget cost estimates for the entire loan program. 
These categories are not mutually exclusive, but they provide a useful 
framework for evaluating the major costs within the loan program. In 
discussing costs in these categories I also dispute the erroneous view 
that the government profits when borrowers default on their loans and 
that it profits on the overall loan program. In my concluding remarks, 
I offer some general principles that I believe should guide any reform 
to accountability policies for Federal student aid.
                   The Cost of Student Loan Defaults
    When borrowers default on their Federal student loans they impose 
costs on taxpayers on average. Recent data have revealed that these 
costs have been rising in recent years.
    There are over eight million borrowers currently in default on 
their loans and that number has increased sharply in recent years. In 
2013, just over six million borrowers were in default. Based on my 
calculation of Department of Education data, about one in five 
borrowers whose loans have come due were in default at the end of 2017. 
\8\ The Department of Education projects that 16.6 percent of loan 
dollars issued in fiscal year 2018 will default at some point in their 
repayment. But a default, which is defined in the program as 270 days 
without an on-time payment (or 360 days for the cohort default rate 
measure), is not necessarily a measure of loss to the government as is 
often implied. \9\
---------------------------------------------------------------------------
    \8\  Jason Delisle and Clare McCann, ``Who's Not Repaying Student 
Loans? More People Than You Think,'' Forbes, September 26, 2014, 
www.forbes.com/sites/jasondelisle/2014/09/26/whos-not-repaying-student-
loans-more-peoplethan-you-think/#51d8345e4c0c.
    \9\  20 USC 1085(l) defines a technical default as a 270-day period 
over which a borrower fails to make a payment. This definition applies 
for all uses of default except for cohort default rate, which is 
defined as a 360-day period in 34 CFR 668.202(c)(1)(iv). For more 
information, see Department of Education, ``Definition of Default for 
Student Eligibility and Cohort Default Rate Calculations,'' February 
25, 2011,https://ifap.ed.gov/eannouncements/
022511DefiDefaultEligiCDR.html and Cornell Law School, ``Calculating 
and Applying Cohort Default Rates,'' www.law.cornell.edu/cfr/text/34/
668.202.
---------------------------------------------------------------------------
    The Federal Government contracts with private collection agencies 
to recover defaulted loans and has its own recovery techniques such as 
wage garnishment and offsets of payments like tax refunds. While the 
Department reports that these efforts allow it to recover most of the 
money owed on defaulted loans, a significant amount is never recovered. 
The Department's latest report puts its estimated recovery rate at just 
76.9 percent of dollars in default (See Figure 1). \10\ That equates to 
a cost to the government from defaults of $4 billion per year, or at 
least $40 billion over the congressional 10-year budget window. The 
recovery rates are in line with recovery rates for defaults on home 
mortgages. \11\
---------------------------------------------------------------------------
    \10\  Department of Education, Student Loan Overviews: Fiscal Year 
2018 Budget Proposal,'' www..ed.gov/about/overview/budget/budget18/
justifications/q-sloverview.pdf.
    \11\  Constantine Yannelis, ``Strategic Default on Student Loans'' 
(working paper, New York University, New York City, 2016), http://
faculty.chicagobooth.edu/workshops/financelunch/past/pdf/Strategic 
percent20Default.pdf.
---------------------------------------------------------------------------
    Figure 1: Student Loan Default and Recovery Rates, FY17 & FY18 
Estimates
    The most recent projected recovery rate reflects a significant 
downward revision from the past years when the Department estimated 
recoveries at 84.3 percent of defaulted dollars (see Figure 1). \12\ 
That changed caused the Department to effectively write down the value 
of loans issued in the past that are still outstanding by $14.6 
billion, as the Department put it, ``reflecting lower actual 
collections on defaults.'' \13\
---------------------------------------------------------------------------
    \12\  Department of Education, ``Student Loan Overviews: Fiscal 
Year 2018 Budget Proposal,'' www..ed.gov/about/overview/budget/
budget18/justifications/q-sloverview.pdf.
    \13\  US Department of Education, External Stakeholders Meeting on 
December 7, 2017, PowerPoint presentation.
---------------------------------------------------------------------------
    While the Department shows that defaults do indeed impose a cost on 
taxpayers, some observers have erroneously claimed that the Federal 
Government actually makes money when borrowers default. They claim that 
the penalty fees and additional interest that borrowers accrue while in 
default nets the government more money than if the borrower repaid on 
time without penalty. While some budget documents do appear to support 
the ``government profits on defaults'' view by showing a recovery rate 
that exceeds 100 percent, these estimates do not net out the fees the 
government must pay to collection agencies to recover the loans and do 
not factor in the time-value of money, effectively valuing a dollar 
recovered 20 years from now as worth the same as a dollar collected 
today. \14\ Once this misleading accounting is corrected and recovery 
rates are adjusted for costs, the Department reports the 76.9 percent 
recovery rate stated above, meaning a default costs taxpayers 23.1 
percent of all loan dollars that go into default. \15\
---------------------------------------------------------------------------
    \14\  Office of Management and Budget, ``Federal Credit Supplement: 
Budget of the U.S. Government Fiscal Year 2018,'' www.govinfo.gov/
content/pkg/BUDGET-2018-FCS/pdf/BUDGET-2018-FCS.pdf.
    \15\  Even that rate may be overstated as the Congressional Budget 
Office reported in a 2007 working paper. When discounting the recovery 
rates for not just the time-value of money, but also the market risk 
inherent in the cash flow, recovery rates drop to 50 percent. For more 
information, see Congressional Budget Office, ``Guaranteed Versus 
Direct Lending: The Case of Student Loans,'' June 2007, www.cbo.gov/
sites/default/files/110th-congress-2007-2008/workingpaper/2007--09--
studentloans--0.pdf.
---------------------------------------------------------------------------
              Income-Based Repayment and Loan Forgiveness
    Another category of costs and risks in the loan program are the 
losses taxpayers face when students repay their loans through the 
Income-Based Repayment (IBR) program. Under the most recent version of 
IBR, which Congress and the Obama administration enacted in 2010 and 
made available to all new borrowers beginning in July 2014, borrowers 
pay 10 percent of their discretionary income toward the loan. After a 
20-year repayment period, any remaining balance is forgiven. Borrowers 
who complete 10 cumulative years of payments in any public sector or 
most nonprofit jobs qualify for the Public Service Loan Forgiveness 
(PSLF) program and have their debts forgiven at that point, 10 years 
earlier than other borrowers using IBR. \16\
---------------------------------------------------------------------------
    \16\  Under current law, borrowers must pay Federal income taxes on 
the amount forgiven under the 20-year forgiveness benefit (not PSLF), 
but its political unpopularity makes it uncertain that this provision 
will go into effect, so the offsetting effects of this provision are 
ignored here.
---------------------------------------------------------------------------
    IBR can provide a large benefit to borrowers at substantial cost to 
the government. The Department projects that many borrowers who use IBR 
will not repay their loans in full and thus receive forgiveness either 
through PSLF or after 20 years of payments for those working in the 
for-profit sector. The Department estimates that it costs taxpayers $27 
for every $100 of loans a borrower repays through IBR due to forgiven 
interest and principal. \17\ The Department also estimates that of the 
2018 cohort of loans, $47 billion will be repaid in IBR.
---------------------------------------------------------------------------
    \17\  White House, Department of Education Budget Fiscal Year 2018, 
https://www.whitehouse.gov/sites/whitehouse.gov/files/omb/budget/
fy2018/edu.pdf.
---------------------------------------------------------------------------
    The benefits that the program provides are not limited to borrowers 
with perpetually low incomes. The changes that the Obama administration 
made to the program in 2010--reducing the share of income on which 
payments are based from 15 percent to 10 percent and reducing the time 
to loan forgiveness from 25 to 20 years--allow borrowers with higher 
incomes to benefit if they borrow large sums to finance a graduate 
education. \18\ Indeed, the Department recently estimated that the 
majority of debt repaid under IBR will be for graduate degrees and 
among those borrowers, most will earn over $100,000 on average during 
repayment. \19\
---------------------------------------------------------------------------
    \18\  Jason Delisle and Alex Holt, ``Winners and Losers in 
President Trump's Student Loan Plan,'' Brookings Institution, August 3, 
2017,www.brookings.edu/research/winners-and-losers-in-president-trumps-
student-loan-plan/; Jason Delisle and Alex Holt, ``A Student Loan Blind 
Spot,'' Washington Post, February 20, 2015, www.washingtonpost.com/
opinions/the-22-billion-student-loan-blind-spot/2015/02/20/e3413e82-
b6f5-11e4-aa05-1ce812b3fdd2--story.html'utm--term=.0d573827272a.
    \19\  Department of Education, ``Comparison of Total Originations 
to the Net Present Value of Payments in Each IDR Repayment Plan: All 
Borrowers Expected to Enter IDR Repayment in 2016,'' www2.ed.gov/about/
overview/budget/budget17/idrtables.pdf.
---------------------------------------------------------------------------
    An accountability measure that looks at defaults alone is unlikely 
to capture the costs to taxpayers associated with IBR as these 
borrowers can generate costs without defaulting. An accountability 
measure that includes how quickly borrowers pay down principal, like 
the metric the Obama administration proposed, would identify 
institutions or education programs where large shares of former 
students both use IBR and have earnings that are low relative to their 
loan balances. For many borrowers, using IBR is not a negative outcome 
per se. What matters for accountability purposes is whether students 
from a particular program or school use IBR and pay down their loans at 
an unusually slow rate due to low incomes. That means IBR is not an 
impediment to using a loan repayment rate for accountability purposes, 
but it does need to be factored into what the minimum level for 
repayment rate should be.
       Borrower Defense to Repayment and Closed School Discharges
    A third category of costs in addition to losses from default and 
IBR are loan discharges in the case of fraud and school closures. In 
these cases, lax accountability policies can expose taxpayers to losses 
because they do not sufficiently guard against fraud or screen out 
institutions likely to close for some other reason.
    Under current law, a Federal student loan borrower who believes 
that he was deceived by an ``act or omission'' of his institution may 
assert a ``defense to repayment,'' which would entitle that borrower to 
full or partial relief from his student loan obligations, potentially 
including amounts already paid on the loan. \20\ For most of its 
existence, borrower defense was a little-used provision. That changed 
with the 2015 collapse of Corinthian Colleges when tens of thousands of 
former Corinthian students had loans discharged, with a cost of $247 
million as of October 2016. \21\
---------------------------------------------------------------------------
    \20\  Cornell Law School, ``20 USC 1087e--Terms and Conditions of 
Loans,'' www.law.cornell.edu/uscode/text/20/1087e.
    \21\  Department of Education, ``U.S. Department of Education 
Announces Final Regulations to Protect Students and Taxpayers from 
Predatory Institutions,'' October 28, 2016, www.ed.gov/news/press-
releases/us-department-education-announces-final-regulations-protect-
students-and-taxpayers-predatory-institutions.
---------------------------------------------------------------------------
    In 2016, the Obama administration issued a regulation to clarify 
the standard for borrower defense. \22\ This rule expanded the range of 
actions by an institution that could justify a loan discharge, 
including ``statements with a likelihood or tendency to mislead under 
the circumstances.'' Secretary of Education Betsy DeVos postponed the 
regulations and proposed a new set of rules that would create a 
stricter standard (relative to the Obama rules) for discharges. \23\
---------------------------------------------------------------------------
    \22\  Department of Education, ``Student Assistance General 
Provisions, Final Regulations,'' 2016, www2.ed.gov/policy/highered/reg/
hearulemaking/2016/bd-unofficialfinalregs-102716.pdf.
    \23\  Department of Education, ``Borrower Defense and Financial 
Responsibility,'' 2017,www2.ed.gov/policy/highered/reg/hearulemaking/
2017/borrowerdefense.html;; Department of Education,``Secretary DeVos 
Announces Regulatory Reset to Protect Students, Taxpayers, Higher Ed 
Institutions,'' June 14, 2017, www.ed.gov/news/press-releases/
secretary-devos-announces-regulatory-reset-protect-students-taxpayers-
higher-ed-institutions.
---------------------------------------------------------------------------
    Estimating the future cost to taxpayers of borrower defense 
discharges is difficult, as the discharges are a recent phenomenon. In 
late 2017, the Department estimated that an increased number of 
borrower defense discharges on outstanding student loans would cost 
taxpayers $5.1 billion. \24\ The Obama administration estimated that 
its version of the borrower defense rules would cost taxpayers $14.9 
billion over 10 years, though this estimate is highly uncertain. \25\ 
As of October 2017, over 135,000 student borrowers had applied for loan 
relief under borrower defense. \26\
---------------------------------------------------------------------------
    \24\  US Department of Education, External Stakeholders Meeting on 
December 7, 2017, PowerPoint presentation.
    \25\  Department of Education, ``Student Assistance General 
Provisions, Final Regulations,'' 2016, www2.ed.gov/policy/highered/reg/
hearulemaking/2016/bd-unofficialfinalregs-102716.pdf
    \26\  Department of Education, ``Borrower Defense and Financial 
Responsibility,'' 2017,www2.ed.gov/policy/highered/reg/hearulemaking/
2017/borrowerdefense.html.
---------------------------------------------------------------------------
    The closure of an institution of higher education can also allow 
students to have their Federal student loans discharged. The Secretary 
of Education may cancel loans for borrowers who were enrolled in an 
institution at the time of its closure, or withdrew fewer than 120 days 
before the institution closed. \27\ If a student completes his degree 
program or successfully transfers his credits to another institution, 
he is not eligible for a closed school discharge.
---------------------------------------------------------------------------
    \27\  Cornell Law School, ``34 CFR 685.214 Closed School 
Discharge,'' https://www.law.cornell.edu/cfr/text/34/685.214.
---------------------------------------------------------------------------
    While school closures are rare, their number has increased in 
recent years. During the 2015-16 academic year, 66 degree-granting 
institutions closed their doors, up from just 11 in 2005-06. \28\ In 
addition, the closure of one large chain of institutions can result in 
significant costs to taxpayers. When Corinthian Colleges closed in 
2015, it left its 56,000 students potentially eligible for a closed 
school discharge; those students accounted for 64 percent of all 
students in schools which closed that year. \29\ Another major chain, 
ITT Technical Institute, closed in 2016 and will generate $461 million 
in closed school discharges according to a court filing in March 2017. 
\30\ Estimating how much taxpayers will lose on future closed school 
discharges, however, is difficult and not included as a line item in 
the Federal budget.
---------------------------------------------------------------------------
    \28\  National Center for Education Statistics, ``Table 317.50: 
Degree-granting Postsecondary Institutions That Have Closed Their 
Doors, by Control and Level of Institution: 1969-70 through 2015-16,'' 
https://nces.ed.gov/programs/digest/d16/tables/dt16--
317.50.asp'current=yes.
    \29\  Government Accountability Office, ``Education Should Address 
Oversight and Communications Gaps in Its Monitoring of the Financial 
Condition of Schools,'' August 2017, www.gao.gov/assets/690/686709.pdf.
    \30\  Jillian Berman, ``Taxpayers Could End Up Paying $460 Million 
Because of ITT Tech's Collapse,'' MarketWatch, March 20, 2017, 
www.marketwatch.com/story/taxpayers-could-end-up-paying-460-million-
because-of-itt-techs-collapse-2017-03-20.
---------------------------------------------------------------------------
                Overall Budget Cost of the Loan Program
    So far my testimony has discussed different types of costs in the 
Federal loan program to illustrate why accountability policies are 
necessary. Another case for accountability policies in the loan program 
is that the program as a whole imposes costs taxpayers. It should 
therefore include policies to limit those costs and prevent limited 
resources from being wasted.
    Some observers have argued that the Federal loan program does not 
impose budgetary costs on the government and instead earns a profit 
from lending. Like the earlier case of default costs, this view is also 
based on misleading accounting.
    While the Congressional Budget Office publishes estimates each year 
showing that the loan program appears to earn a profit for the 
government, the agency has criticized the accounting rules--written by 
Congress in the Federal Credit Reform Act of 1990 (FCRA)--that require 
it to publish such figures. According to those rules, Federal student 
loans issued over the coming 10 years will earn the government $28 
billion. CBO argues that the accounting rules that require it to 
produce that estimate, ``do not provide a comprehensive measure of what 
Federal credit programs actually cost the government and, by extension, 
taxpayers,'' and the agency has suggested a more comprehensive measure 
called fair-value accounting. \31\ Under that method, CBO reports that 
the loan program will cost taxpayers $183 billion over the next 10 
years. Fair-value accounting, CBO explains, includes a more 
comprehensive measure of risk that effectively assigns a cost to the 
loans because the interest rate the government charges borrowers is not 
enough to fully compensate for the risk of losses from default and loan 
forgiveness.
---------------------------------------------------------------------------
    \31\  Congressional Budget Office, ``Fair-Value Accounting for 
Federal Credit Programs,'' Issue Brief March 2012, www.cbo.gov/sites/
default/files/112th-congress-2011-2012/reports/03-05-
fairvaluebrief.pdf.
---------------------------------------------------------------------------
   Guiding Principles for Federal Student Aid Accountability Policies
    My testimony today has detailed the ways in which the Federal 
student loan program entails financial risk for taxpayers and results 
in budgetary costs. Those risks and costs are the underlying reason why 
accountability policies are an essential feature of the loan program. 
Low-quality education programs, overpriced courses, and sham 
credentials exacerbate costs in the loan program by driving up 
defaults, loan forgiveness, and discharges. This is not to suggest, 
however, that the current set of accountability measures are optimal. 
To conclude, I will suggest several guiding principles that I believe 
will lead policymakers to adopt fair, consistent, and efficient 
accountability policies for Federal student aid programs.
                            Go Beyond Loans
    The introduction of my testimony already made the case for 
accountability measures that go beyond student loans. At a minimum, 
accountability measurements should include Federal grant aid, and 
possibly even gross tuition prices that cohorts of students paid. They 
might also include Federal tuition tax credits as another source of 
aid. After all, current policies use loans as a proxy to gauge both 
Federal funding and price. If policymakers want to measure those things 
for accountability purposes, there are more comprehensive ways to go 
about it.
    Consider that the Federal Pell Grant program, which disburses 
approximately $28 billion in aid annually, has far fewer accountability 
measures attached to it than the loan program. \32\ Many in the policy 
community advocate for further accountability measures based on loan 
payments (e.g., risk sharing and repayment rates) but ignore the Pell 
Grant program. An accountability measure could be based on a ``grant-
to-income'' ratio or a ``total-aid-to-income'' ratio like the one that 
exists for loans under the gainful employment regulation. Furthermore, 
institutions of higher education can already opt out of the loan 
program to avoid its accountability measures while maintaining access 
to Pell Grants and their relatively lax quality assurance policies. 
\33\
---------------------------------------------------------------------------
    \32\  Department of Education, ``Fiscal Year 2018 Budget Summary 
and Background Information,'' https://www2.ed.gov/about/overview/
budget/budget18/summary/18summary.pdf.
    \33\  Deborah Frankle Cochrane and Robert Shireman, ``Denied: 
Community College Students Lack Access to Affordable Loans,'' The 
Institute for College Access and Success, April 17, 2008, https://
ticas.org/sites/default/files/pub--files/denied.pdf.
---------------------------------------------------------------------------
    Low-tuition institutions, such as community colleges, that still 
participate in the loan program but whose students infrequently borrow 
also skirt accountability measures that rely solely on loan repayment 
measures. Their students' small loan balances may make it appear as if 
the institutions provide good value, but that may not be the case if 
former students' earnings are measured against Pell Grant aid or total 
tuition.
    Of course, loans offer a convenient but crude proxy for gauging a 
student's post enrollment earnings in a way that grants or out-of-
pocket tuition payments can never capture. Grants and out-of-pocket 
payments do not generate a repayment cash-flow like loans, so there is 
no way to infer whether a student has sufficient earnings. Policymakers 
could, however, measure earnings more directly by querying payroll tax 
information as they have done under the Obama administration's gainful 
employment regulation.
  Apply Accountability Standards Consistently to All Institutions or 
                                Programs
    There are a number of places where statute and regulation impose 
different accountability standards on institutions of higher education 
depending on whether an institution is for-profit. Policymakers are 
rightly concerned about taxpayer and consumer protections for Federal 
student aid spent at those institutions. But bad student outcomes are 
no less worrisome if they occur at public or private non-profit 
institutions.
    For example, there are likely many graduate degree programs at 
private non-profit and public universities whose graduates have low 
earnings or low repayment rates relative to the price students paid and 
the Federal loans they borrowed. Yet the gainful employment statute 
(and therefore the regulations) does not apply to degree programs at 
such institutions, only those at for-profit institutions. Graduate 
certificate programs, however, are treated equally across institution 
types which resulted in a revealing case in 2016 when a Harvard 
University graduate certificate in theater and drama performance ran 
afoul of the gainful employment regulation's debt-to-income test. Had 
this credential been a degree and not a certificate it would have 
escaped the accountability measure because Harvard is a non-profit 
institution. \34\ (Harvard shuttered the program after the finding.)
---------------------------------------------------------------------------
    \34\  Kevin Carey, ``Programs That Are Predatory: It's Not Just at 
For-Profit Colleges,'' New York Times, January 13, 2017, 
www.nytimes.com/2017/01/13/upshot/harvard-too-obamas-final-push-to-
catch-predatory-colleges-is-revealing.html.
---------------------------------------------------------------------------
    This case illustrates why it makes sense to treat institutions and 
programs consistently. If former students end up with high debt and 
relatively low earnings, the type of institution or credential should 
not have a bearing on whether accountability measures to protect 
taxpayers and consumers should apply.
    Of course, the Harvard example is one program and one school, 
albeit a high-quality prestigious one. A more comprehensive analysis 
shows weak loan performance across institution types. For example, one 
recent study found that 74 percent of students who attended a for-
profit institution owed more on their loans 2 years after beginning 
repayment in 2012 than when they entered repayment. \35\ That is 
clearly a troubling statistic. These students either defaulted or 
entered into a forbearance to postpone payments on their debts. Yet 
public and private nonprofit 2-year institutions performed nearly as 
bad. Among their students, 64 percent owed more on their loans after 
the 2-year mark.
---------------------------------------------------------------------------
    \35\  Adam Looney and Constantine Yannelis, ``A Crisis in Student 
Loans? How Changes in the Characteristics of Borrowers and in the 
Institutions They Attend Contributed to Rising Loan Defaults,'' 
Brookings Institute, September 2015, www.brookings.edu/wp-content/
uploads/2015/09/LooneyTextFall15BPEA.pdf.
---------------------------------------------------------------------------
Resist the Urge for Central Planning in Accountability Policies--Set a 
                             floor Instead
    There is a temptation in designing accountability measures to 
overreach and use Federal policies as a central planning system. Under 
this view, accountability measures should channel Federal funds to the 
``best'' programs or the ``most in-demand credentials'' and cut them 
off for others. The Obama administration's abandoned attempt to rate 
institutions of higher education falls within this type of policy. 
Another is a plan in Kentucky to provide free short-term credentials at 
public community colleges, but only in fields approved by policymakers. 
\36\ These fields are supposed to be in high demand in the labor 
market, except policymakers are not likely to be good judges of that 
criteria and will surely make politically driven decisions about which 
credential to support. The same dynamic can be expected to occur at the 
Federal level, which is why policymakers should strive to leave such 
decisions to the market. Instead, accountability measures should strive 
to set a reasonable floor that guards against waste and fraud.
---------------------------------------------------------------------------
    \36\  Preston Cooper, ``Why `Free College Lite' Doesn't Make Sense 
for Kentucky,'' Forbes, April 19, 2017, www.forbes.com/sites/
prestoncooper2/2017/04/19/why-free-college-lite-doesnt-make-sense-for-
kentucky/#39e0650775b0.
---------------------------------------------------------------------------
 Data and Information Alone Can be an Effective Accountability Policy.
    Finally, policymakers should consider that information can be an 
effective accountability tool--even if it does not include triggers for 
punitive actions. Consumer information plays a vital role in a smooth 
functioning market. Institutions and programs that offer low returns on 
investment--but not low enough to trigger accountability measures--
would be disciplined by market forces. The role for accountability 
policy here is that unlike a publicly traded company that must disclose 
its own detailed financial statements each quarter, universities cannot 
be made to disclose information on student outcomes because they have 
no way to reliably collect this information. The Federal Government 
can, however, collect that information through payroll tax and other 
data collection efforts. The Department of Education is making some of 
this information available, but could go further. \37\
---------------------------------------------------------------------------
    \37\  Department of Education, ``College Scorecard,'' 2018, https:/
/collegescorecard.ed.gov/.
---------------------------------------------------------------------------
    To offer one specific example, the College Scorecard data could be 
expanded to include graduate schools and programs. Those data are 
currently excluded. Meanwhile, in recent years the Federal Government 
has greatly expanded financial aid to graduate students by eliminating 
borrowing limits in the Federal loan program and offering more generous 
income-based repayment plans. That likely has contributed to the large 
increase in borrowing among graduate students. \38\ Emerging evidence 
shows that graduate degrees have a wide range of returns in the labor 
market, and most alarmingly, some degrees lead to earnings no higher 
than those for associate degrees. \39\ When those degrees are financed 
with Federal loans and generous income-based repayment plans that 
include loan forgiveness, policymakers have an interest in exposing and 
mitigating the risk of taxpayer losses that stem from such outcomes.
---------------------------------------------------------------------------
    \38\  Jason Delisle, ``The Graduate Student Debt Review,'' New 
America, 2014, https://static.newamerica.org/attachments/750-the-
graduate-student-debt-review/GradStudentDebtReview-Delisle-Final.pdf.
    \39\  Mark Schneider and Jorge Klor de Alva, ``The Master's as the 
New Bachelor's Degree: In Search of the Labor Market Payoff,'' American 
Enterprise Institute, January 2018, www.aei.org/wp-content/uploads/
2018/01/The-Masters-as-the-New-Bachelors-Degree.pdf.
---------------------------------------------------------------------------
    That concludes my testimony today and I look forward to answering 
any questions that you may have about Federal student loans and 
accountability policies.
                                 ______
                                 
                [summary statement of jason d. delisle]
    The Federal role in higher-education lending has grown ever since 
lawmakers enacted the first loan program under the National Defense 
Education Act of 1958. This expansion, along with rising college costs 
and increasing student enrollments, has led to a rapid increase in the 
stock of outstanding debt in recent years. Now at $1.3 trillion, the 
student loan program rivals the Federal Housing Administration's 
largest mortgage program in size.
    Given the size and scope of the loan program, it is important to 
understand that the loan program imposes costs on taxpayers. Such costs 
speak directly to the need for policies that guard against fraud, 
waste, and abuse along with policies that provide information about 
loan performance. Borrowers who attend poor quality or overpriced 
programs will struggle to repay their debt and in turn impose losses to 
taxpayers.
    In that regard, my testimony details how the loan program imposes 
costs and risks on taxpayers to illustrate why accountability policies 
are necessary. While my discussion focuses on costs, this is not to 
suggest that loan program is not valuable for students and the economy 
as a whole. Generally, I believe a well-designed Federal student loan 
program plays an important role in our higher education system and is 
worth the budgetary costs. However, my goal today is to focus on the 
cost side of that cost-benefit analysis.
    My testimony today examines the loan program by looking at four 
categories of costs: loan defaults; Income-Based Repayment and loan 
forgiveness programs; loan discharges for fraud and closed schools; and 
last, comprehensive budget cost estimates for the entire loan program. 
These categories are not mutually exclusive, but they provide a useful 
framework for evaluating the major costs within the loan program. In 
discussing costs in these categories I also dispute the erroneous view 
that the government profits when borrowers default on their loans and 
that it profits on the overall loan program. In my concluding remarks, 
I offer some general principles that I believe should guide any reform 
to accountability policies for Federal student aid.
                                 ______
                                 
    The Chairman. Thank you, Mr. Delisle.
    Mr. Miller, welcome.

    STATEMENT OF BEN MILLER, SENIOR DIRECTOR, POSTSECONDARY 
    EDUCATION, CENTER FOR AMERICAN PROGRESS, WASHINGTON, DC

    Mr. Miller. Good morning, Chairman Alexander, Ranking 
Member Murray, and other Members of the Committee. Thank you 
for the opportunity to testify today.
    Federal student aid is a deal between taxpayers, students, 
and institutions. When students don't keep up their end of the 
bargain, we hit them hard, wrecking their credit, docking their 
wages, seizing their tax refunds or Social Security checks. But 
there's almost no accountability when colleges break their 
promises or repeatedly fail to educate students.
    Yes, there are thousands of institutions that deliver on 
the American Dream by moving students into the middle class. 
But our current accountability system does not do enough for 
students traditionally underserved by post-secondary education. 
One million borrowers default on their Federal direct student 
loans each year. Half of African American borrowers default on 
their loans within 12 years of entering college. Nearly 90 
percent of defaulters also received a Pell Grant at some time.
    Poor outcomes cost taxpayers, too. We invest billions in 
schools that repeatedly fail to educate most of their students. 
Our economy suffers from the lost earnings potential of 
students who did not receive the knowledge and skills needed to 
succeed in the workplace.
    The Department of Education's main accountability metric is 
the cohort default rate. Yes, default is a horrible outcome, 
but this measure is little more than a finger wag. Just 10 
schools were at risk of losing Federal aid last year for high 
default rates; 99.9 percent of defaulters attended schools that 
have little to fear from this measure.
    Repayment rates are potentially a stronger and more 
aspirational accountability measure. They send a message that 
we want our borrowers to repay successfully, not just avoid the 
worst possible outcome.
    But we still must figure out the proper way to define and 
use repayment rates. For instance, there's no agreement on what 
constitutes successful repayment. The most common approach is 
to say a borrower needs to pay at least $1 of their principal 
balance within 3 years of entering repayment. We may be better 
off judging whether or not borrowers are on track to repay 
within 20 or 25 years. We also must define what repayment 
standards schools should be held to.
    These are tough issues that demand additional data that is 
already held by the Department of Education to properly 
understand the different effects of repayment rate regimes.
    But Congress must also understand that repayment rates are 
just one component of making Federal accountability work. A 
reauthorization of the Higher Education Act must establish a 
Federal accountability system that aligns the interests of 
students, schools, and taxpayers.
    That starts with using multiple accountability measures and 
looking at results by racial, ethnic, and socioeconomic 
subgroups. Using just one indicator is insufficient because it 
is too easy to game. And we must look at outcomes through an 
equity lens in order to identify unacceptable performance gaps 
and ensure our higher education system is truly a ladder of 
opportunity.
    There's more to accountability than just outcomes, though. 
We also need stronger gatekeeping to keep lousy actors out of 
the aid programs and ongoing guardrails to keep schools from 
breaking bad.
    Recent history illustrates how insufficient our guardrails 
are. In the late 1990's and early 2000's we had several for-
profit colleges that had good business models and decent 
outcomes. But financial incentives encouraged them to grow too 
big too fast, or they were bought by Wall Street-backed firms 
that changed how they operated. It took years for us to see the 
results of this, and it wasn't pretty. At their peak, private 
for-profit colleges enrolled a little over 10 percent of 
students but produced nearly half of defaulters. Stronger 
guardrails should have discouraged hyper-growth or blocked 
sales to questionable owners.
    We also need more flexible consequences that go beyond 
terminating financial aid for the worst performers. We need 
stronger minimum bars for Federal student aid, but we also need 
incentives to boost performance of schools with mediocre 
results.
    Accountability must also acknowledge the diversity of our 
higher education system. While all colleges should be held 
accountable for loan outcomes, we should not pretend that the 
business models and incentives of a college backed by Wall 
Street are the same as the local community college.
    Finally, the rest of the higher education system must step 
up. No one has kept up their end of the bargain around funding 
or cost containment. States, the Federal Government, and 
accreditors have played accountability hot potato for too long. 
The result is too many states fail to provide proper oversight 
of the colleges serving their students, and some accreditation 
agencies turned a blind eye while places like Corinthian 
Colleges and ITT Technical Institute faced a raft of lawsuits 
and complaints.
    It has been nearly a decade since Congress last 
reauthorized the Higher Education Act. Since then, many 
students have suffered from unaffordable loans and insufficient 
educations. Millions more will be harmed going forward if we 
don't get accountability right this time.
    Thank you for the opportunity to testify, and I look 
forward to answering any questions you may have.
    [The prepared statement of Mr. Miller follows:]
                    prepared statement of ben miller
    Chairman Alexander, Ranking Member Murray and other Members of the 
Committee, thank you very much for the opportunity to testify today.
                              Oral remarks
    Federal student aid is a deal between taxpayers, students, and 
institutions. When students don't keep up their end of the bargain we 
hit them hard--wrecking their credit, docking their wages, seizing 
their tax refunds or Social Security checks. But there's almost no 
accountability when colleges break their promises or repeatedly fail to 
educate their students.
    Yes, there are thousands of institutions that deliver on the 
American dream by leading students into the middle class. But the 
results of our current accountability system are grim, especially for 
students traditionally underserved by postsecondary education. One 
million borrowers default on their Federal Direct loans each year. 
\1\alf of African American borrowers default on their loans within 12 
years of entering college. \2\ Pell Grant recipients comprise nearly 90 
percent of defaulters. \3\
---------------------------------------------------------------------------
    \1\  Office of Federal Student Aid, ``Default Rates,'' available at 
https://studentaid.ed.gov/sa/about/datacenter/student/default (last 
accessed November 2017).
    \2\  Ben Miller, ``New Federal Data Show a Student Loan Crisis For 
African American Borrowers,'' Center for American Progress, October 
2017, https://www.americanprogress.org/issues/educationpostsecondary/
news/2017/10/16/440711/new-Federal-data-show-student-loan-crisis-
african-americanborrowers/.
    \3\  Ben Miller, ``Who are Student Loan Defaulters?'' Center for 
American Progress, December 2017, https://www.americanprogress.org/
issues/education-postsecondary/reports/2017/12/14/444011/studentloan-
defaulters/.
---------------------------------------------------------------------------
    Poor outcomes cost taxpayers too. We invest billions in schools 
that repeatedly fail to educate most of their students. Our economy 
suffers from the lost earnings potential of students who did not 
receive the knowledge and skills needed to succeed in the workplace.
    The Department of Education's main accountability metric is the 
cohort default rate. Yes, default is a horrible outcome. But this 
measure is little more than a finger wag. Just 10 schools risked losing 
Federal aid last year for high default rates--99.9 percent of 
defaulters attended schools that have little to fear from this measure. 
\4\
---------------------------------------------------------------------------
    \4\  Ben Miller, ``Improving Federal Accountability for Higher 
Education,'' Center for American Progress, October 2017, https://
www.americanprogress.org/issues/educationpostsecondary/reports/2017/10/
24/440931/improving-Federal-accountability-for-higher-education/.
---------------------------------------------------------------------------
    Repayment rates are potentially a stronger and more aspirational 
accountability measure. They send a message that our loan system should 
expect student success, not just avoid the worst possible outcome.
    But we still have to figure out the proper way to define and use 
repayment rates. For instance, there's no agreement on what constitutes 
successful repayment. The most common approach is to say a borrower 
needs to pay at least $1 of their principal balance by the end of 3 
years. We may be better off judging if borrowers are on track to repay 
within 20 or 25 years. We also must address issues around repayment 
rate benchmarks and how to treat subsequent enrollment.
    These are tough issues that demand additional data already held by 
the Department of Education to understand the potential effects of 
different repayment rate regimes.
    Congress must also understand that repayment rates are just one 
component of making Federal accountability work. A reauthorization of 
the Higher Education Act must establish a Federal accountability system 
that aligns the interests of students, schools, and taxpayers.
    That starts with using multiple accountability measures and looking 
at results by racial, ethnic, and socioeconomic subgroups. Using just 
one indicator is insufficient because it is too easy for bad actors to 
game. And we must look at outcomes through an equity lens to catch 
unacceptable performance gaps and ensure our higher education system is 
the ladder of opportunity it needs to be.
    There's more to accountability than just outcomes, though. We need 
stronger gatekeeping to keep lousy actors out of the aid programs and 
ongoing guard rails to keep schools from breaking bad.
    Recent history illustrates how insufficient our guardrails are. In 
the late 1990's and early 2000's we had several for-profit colleges 
that had good business models and decent outcomes. But financial 
incentives encouraged them to grow too big or they were bought by Wall-
Street backed firms that altered how they operated. It took years for 
us to see the change in outcomes, and it wasn't pretty. At their peak, 
private for-profit colleges were a little over 10 percent of students 
and nearly half of defaulters. Stronger guardrails should have 
discouraged hyper growth or blocked sales to questionable owners.
    We also need more flexible consequences that go beyond terminating 
financial aid for the worst performers. We need stronger minimum bars 
for receiving Federal aid. But we also need incentives to boost 
performance of schools with mediocre results.
    Accountability must also acknowledge the diversity of our higher 
education system. While all colleges should be held accountable for 
their loan outcomes, we should not pretend that the business model and 
incentives of a college backed by Wall Street are the same as the local 
community college.
    Finally, the rest of the higher education system must step up. No 
one has kept up their end of the bargain around funding or cost 
containment. States, the Federal Government, and accreditors have 
played accountability hot potato for too long. The result is too many 
states fail to provide proper oversight of the colleges serving their 
students, and some accreditation agencies turned a blind eye while 
places like Corinthian Colleges and ITT Technical Institute faced rafts 
of lawsuits and complaints.
    It has been nearly a decade since Congress last reauthorized the 
Higher Education Act. Since then, millions of students have suffered 
from unaffordable loans and insufficient educations. Millions more will 
be harmed going forward if we don't get accountability right this time.
    Thank you again for the opportunity to testify and I look forward 
to answering any questions you may have.
                 Additional comments on repayment rates
The case for and limitations of repayment rates
    Currently, the Education Department's sole measure for judging 
colleges' student loan outcomes is to look at the percentage of 
borrowers who default within 3 years of entering repayment. \5\ Though 
default is unquestionably the worst outcome for a loan borrower, it's 
an insufficient measure for Federal loans, especially when tracked for 
such a short timeframe. That's because Federal debts contain a host of 
repayment options that allow borrowers to pause payments without going 
delinquent. These tools can easily push defaults outside the 3-year 
measurement window, making results appear overly rosy. For instance, a 
Center for American Progress analysis found that of borrowers who 
defaulted within 12 years of first entering college, only a slim 
majority did so in the first 3 years after entering repayment. \6\
---------------------------------------------------------------------------
    \5\  https://www..ed.gov/offices/OSFAP/defaultmanagement/cdr.html
    \6\  Miller, ``Who are Student Loan Defaulters?''
---------------------------------------------------------------------------
    Creating a repayment rate measure would not fix the potentially 
insufficient measurement window, but such a rate would offer a broader 
view of what it means to struggle with student debt. It would look at 
whether borrowers make progress retiring their loans, rather than 
avoiding default through deferment or forbearance--thus holding 
colleges accountable if larger numbers of their borrowers appear to be 
making few if any payments. Repayment rates can also identify colleges 
where more borrowers may be relying on tools to pause payments because 
they are facing economic hardships or unemployment--potential signs 
their education was of insufficient quality.
    Focusing on repayment, not just default, would also set a higher 
performance bar for institutions. Meeting default rate requirements 
simply entails pushing students to enter any status other than default. 
By contrast, most suggested definitions of successful repayment require 
borrowers to be making payments toward retiring their debt, or in some 
cases using repayment options tied to their income.
    Repayment rates, however, are a complicated measure that touch on 
issues related to how students move through higher education and 
repayment. Failing to understand these nuances can result in a 
repayment measure that unfairly labels successful programs as failures. 
To avoid that challenge, there are six policy choices that Congress 
must consider as it weighs how to define and use repayment rates.
  Policy Choice #1: What is successful repayment and how should it be 
                              calculated?
    While there is strong bipartisan interest in making repayment rates 
an accountability metric, there is less agreement about what should 
constitute successful repayment and how it should be calculated. 
Different approaches to calculating a repayment rate would likely 
produce wildly different results. Unfortunately, insufficient data from 
the U.S. Department of Education make it impossible to tell exactly 
what the effects of various calculations are. Before it implements any 
proposed repayment rate, Congress should obtain detailed modeling data 
to ensure it fully understands the ramifications of any calculation.
                     Defining successful repayment
    To date there are two main proposals for how to define successful 
repayment. The most recent comes from legislation introduced in the 
U.S. House of Representatives to reauthorize the Higher Education Act. 
It proposes that successful repayment means a borrower did not default, 
is not in certain deferment statuses, and is not more than 90 days 
delinquent at the end of the third fiscal year in repayment. \7\ 
Borrowers who have an in-school deferment or a military service 
deferment at the time of measurement count as repayment successes.
---------------------------------------------------------------------------
    \7\  Kristin Blagg, ``Large uncertainty under the PROSPER Act's 
proposed student loan accountability metric,'' Urban Institute, January 
18, 2018, https://www.urban.org/urban-wire/large-uncertainty-
underprosper-acts-proposed-student-loan-accountability-metric.
---------------------------------------------------------------------------
    Though called a repayment rate, this measure is more a reflection 
of an active repayment status or excused absence. It does not tell us 
much about a borrower's long-term repayment trajectory. And by testing 
for delinquency only at the end of the measurement window it allows a 
college to get credit for a borrower that corrected their status only 
days before being assessed.
    The most commonly used definition of repayment rates lacks some of 
the flaws in the House bill, but raises other issues. This definition 
has appeared on both the College Scorecard and as part of the original 
proposals from the Department of Education to define what it means to 
provide training that leads to gainful employment in a recognized 
occupation. It defines success as a borrower who has not defaulted and 
repaid at least $1 of their original principal balance after 3 years in 
repayment. This measure deems a borrower as a success if they simply 
owe anything less than what they borrowed.
    The challenge with this approach is a $1 reduction in principal 
after three or more years in repayment is not evidence of a path toward 
paying off a loan in any reasonable amount of time. For example, a 
borrower who owes $10,000 with a 5 percent interest rate when they 
enter repayment would have retired just over a quarter of what they 
owed after 3 years in repayment on the standard 10-year plan. Even if 
they are paying off the loan over 25 years, they should have reduced 
their principal by almost 10 percent. \8\
---------------------------------------------------------------------------
    \8\  Ben Miller, ``Do Income-Based Repayment Plans Really Ruin 
Repayment Rates?'' New America, December 2013, https://web.archive.org/
web/20150405035404/www.edcentral.org/income-basedpayment-plans-really 
ruin-repayment-rates/.
---------------------------------------------------------------------------
    What Congress should do: Given these concerns, Congress should 
strive for a more ambitious bar for what it means to achieve repayment 
success. It should define success as meaning borrowers have not 
defaulted and owe no more than what we would expect to still be 
outstanding on their loan if they were to pay down the debt over a 25-
year period. What this tests for is whether it looks like borrowers are 
going to pay off their loans within the longest timeframe afforded 
prior to loan forgiveness. The goal is to ensure we do not issue too 
many loans that appear to be headed toward eventual forgiveness.
                      Calculating repayment rates
    The next issue is whether to calculate repayment rates based upon 
students or dollars involved. Both have benefits and drawbacks. 
Unfortunately, without better data available, it is difficult to know 
which is the superior approach.
    A student-based calculation treats all borrowers equally. This 
formula defines a threshold for the percentage of students who attended 
an institution or program who must have demonstrated successful 
repayment within the desired number of years after entering repayment. 
In the most common form of repayment rates, this has meant saying 
programs or institutions must have at least 45 percent of their 
borrowers repaying.
    The main argument for a student-based approach is it ensures that 
poor results of lower-debt dropouts do not get masked by successful 
completers. Within a given program or institution students who 
graduated tend to have higher debt levels than those who dropped out. 
But dropouts are also more likely to struggle with their loans. A 
student-based measure ensures a school will remain concerned about 
dropouts because they can hurt its overall rate.
    A dollar-based approach, by contrast, allows a sufficient number of 
successes to cancel out failures. There are two ways to use a dollar-
based approach: to weight students or pooled. The weighted student 
approach calculates the result for each student, but expresses the 
result in terms of their loan balance. An example illustrates what this 
means. Imagine a school had two borrowers who entered repayment, one 
who owed $10,000 and another who owed $30,000.
    The borrower who owes $30,000 repays while the other does not. In a 
dollar-weighted formula the repayment rate is thus 75 percent ($30,000 
divided by $40,000) because three-quarters of the loan dollars are held 
by students who are repaying.
    Using a student-weighted dollar approach is less desirable than a 
student-based approach. Focusing on dollars instead of students lessens 
the plight of dropouts. It is also less intelligible as a consumer 
measure.
    A pooled approach is the better option for judging repayment based 
on dollars. This calculation treats all the loans issued to a given 
institution or program as if they were one big loan, and then tests 
whether the total amount is repaid. In other words, if the total 
original principal balance of all loans at a school is $100,000, the 
school would have to show that the cumulative remaining balance after 
several years meet the bar for successful repayment.
    The advantage of a pooled approach is there is no need to figure 
out the threshold for repayment rates. The summed loan balance either 
did or did not repay. This approach also gives schools credit for 
students who pay down a lot because they can counterbalance other 
balances that may have grown. Whether that's a desired goal or not 
depends on how worried Congress is about the plight of low-balance 
borrowers.
    What Congress should do: Obtain data and modeling from the U.S. 
Department of Education to understand the effects of different 
repayment calculations. This should include asking for how results 
might vary by income and race.
     Policy Choice #2: What should be the repayment rate benchmark?
    Congress also needs to determine thresholds for repayment rates. 
Unfortunately, there is no widely accepted benchmark for a repayment 
rate measure. Earlier iterations of the gainful employment regulation 
suggested programs should face sanctions if 35 percent or fewer of 
their borrowers repaid. A judge, however, ruled that the Education 
Department did not properly justify that threshold. A House bill to 
reauthorize the Higher Education Act suggested a threshold of 45 
percent on a measure with a different definition.
    The lack of accepted repayment rate benchmarks creates challenge 
for its use. From a philosophical standpoint, the notion that having 
fewer than half of borrowers successfully repay seems like an awfully 
low bar. At the same time, there has not been enough research into the 
repayment path of borrowers who do not repay. This makes it hard to 
understand whether the bar for successful repayment is high enough that 
setting such a seemingly low benchmark is acceptable.
    What Congress should do: Obtain better data from the Education 
Department to model the effects of different repayment rate benchmarks. 
This should be supplemented by student-level analysis of how non-paying 
borrowers experience repayment. For instance, this analysis should look 
at whether borrowers missing the repayment test are simply payments 
that are not large enough, are using deferments or forbearances, or 
doing other things that explain why they come up short.
    Policy Choice #3: How should repayment rates address subsequent 
                   enrollment at another institution?
    Any discussion of repayment rates needs to include a discussion 
about how to treat students' subsequent enrollment at other 
institutions. This is especially an issue for students who go to 
graduate school, but also matters for those who transfer among 
undergraduate institutions.
    Students who acquire debt from multiple institutions create 
complicate the repayment rate in two main ways: (1) balance growth due 
to in-school deferment and (2) behavioral changes due to higher debt 
levels.
    When students enroll at another institution of higher education, 
they get an in-school deferment, in which some loan types will continue 
accumulating interest that is then added to their principal balance the 
next time they enter repayment. This matters because a student who 
enters repayment, then transfers or goes to graduate school, could 
appear to fail a repayment test solely because they aren't paying 
accumulating interest while enrolled again. Failing to account for 
interest accumulation while enrolled at another institution can make 
the original school's results seem unfairly negative for reasons 
outside of its control.
    This problem is likely a bigger deal with graduate school 
enrollment than with transferring. That's because students who enter 
graduate school most likely had a longer gap between enrollment than 
someone who transfers. By taking time off between finishing their 
undergraduate education before going to graduate school many of these 
students enter repayment--establishing the initial balance for 
measuring repayment--and then receive an in-school deferment where 
their balance grows. By contrast, students who transfer are less likely 
to have a large enough gap between enrollment to enter repayment. As a 
result, their balance tracked for repayment rate purposes is more 
likely to be determined after their enrollment in another institution.
    Long-term repayment data from the Department of Education suggest 
that in-school deferments may be contributing to students to owing more 
than they originally borrowed. Of students who started school in 2003-
04, borrowed, and in 2015 owed more than they originally borrowed, 54 
percent had used at least one in-school deferment. That's 12 percentage 
points higher than individuals who owed less than they originally took 
out but had not paid off their loan. \9\
---------------------------------------------------------------------------
    \9\  National Center for Education Statistics, ``Datalab, Beginning 
Postsecondary Students 2004-2009, Table ccabka13,'' available at 
https://nces.ed.gov/datalab/ (last accessed January 2018).
---------------------------------------------------------------------------
    The second issue with debt from multiple colleges is that a higher 
total loan balance can affect repayment behavior. Imagine a student 
starts at community college and borrows $5,000. They then go to a 
public 4-year school and borrow another $20,000. That additional debt 
burden may make them more likely to use income-driven repayment (IDR) 
because they get a larger payment reduction, possibly resulting in them 
not paying enough to retire the original debt at a speedy pace. 
Alternatively, they may not be able to handle that total balance, 
forcing them into a deferment or forbearance. Similarly, if a borrower 
cannot afford the full payment on their loan balance, then partial 
payments may not reduce the lower debt from the first school as much as 
it otherwise would.
    What legislators should do: Addressing the problem of debt from 
multiple institutions requires distinct solutions for subsequent 
student enrollment and the potential effects of having a greater loan 
balance.
    For the subsequent enrollment issue, institutions should be held 
accountable for the balance owed upon entering repayment after the in-
school deferment. In other words, if a student borrows $10,000, enters 
repayment, then goes back to school where the balance grows to $12,000, 
that last amount should be the starting point for measuring whether a 
borrower has reduced their original balance. This approach ensures that 
the first school will not be held accountable for in-school interest 
accumulation due to attendance at another institution.
    Looking at a balance once a student leaves a second school also has 
implications for what cohort a student should be placed in. Students 
should only be measured for repayment purposes after it has been at 
least 3 years since their last in-school deferment and subsequent grace 
period. This means a student who is in repayment for 2 years and then 
goes to graduate school gets placed into a later cohort that starts 
after they enter repayment again. While this may seem more complicated 
to administer, it's a necessary change to ensure that borrowers are 
judged on a better measure of their balance upon entering default, and 
then tracked for sufficient time to be fairly assessed on whether they 
can repay.
    Concerns about how greater debt balances affect repayment is best 
addressed by assuming all payments get applied to debt from each 
school. An example highlights how this would work. Assume a borrower 
has $20,000 total, with $5,000 coming from one school and $15,000 from 
another. Their monthly payment is $200, with $50 going to the $5,000 
debt and the rest to the other loan balance. The repayment rate 
calculation should act as if the entire $200 payment went to both sets 
of loans. While this does result in double counting payments, it 
ensures that neither school is potentially harmed by the presence of 
debt from another institution.
  Policy Choice #3: How should repayment rates address income-driven 
                               repayment?
    The income-driven repayment (IDR) plans present complexities for 
repayment rates. These plans are a crucial safety net for borrowers 
that must be preserved. They help borrowers avoid default on debts they 
could not otherwise afford and give them an eventual path out from 
under their loans. An IDR plan, however, is not a get-out-of-jail-free 
card for institutions. Schools where large numbers of students avail 
themselves of IDR plans may be providing educations that are too 
expensive compared to their economic return.
    Using IDR can alter a borrower's perceived repayment success in a 
few ways. First, by offering borrowers payments below what they would 
make on the standard 10-year plan, it is possible that a borrower may 
be making all their required payments but still seeing their balance 
grow due to interest accumulation or their principal balance not get 
retired more slowly. However, it is important to understand that just 
going on IDR does not guarantee a borrower will fail to cover their 
interest payments. For example, a borrower who owes $10,000 must earn 
about $32,500 to make payments on IDR akin to what they would on the 
10-year standard plan. If they make more than about $23,500 then they 
will still cover some of their accumulating interest. \10\
---------------------------------------------------------------------------
    \10\  Miller, ``Does Income-Based Repayment Really Ruin Default 
Rates?'
---------------------------------------------------------------------------
    The timing lag of IDR payment calculations further complicates this 
issue. In most cases, a borrower's payment for IDR purposes is based 
upon their income from the calendar year for which they most recently 
field taxes. In other words, a borrower applying for IDR today might 
well be using 2016 income. This matters because students who go onto 
IDR right away will likely have their payments based off of the lower 
income they had in their last year of school, not their current 
earnings. This likely results in lower payments for their first year in 
IDR, which can affect overall interest accumulation.
    It would be easy to label a borrower making IDR payments that do 
not keep up with interest as a failure under a repayment rate test. But 
this brings up the second challenging effect of IDR--these plans make 
repayment progress non-linear. Many borrowers on IDR plans are still 
expected to repay within a 20 year timeframe, by paying down a much 
greater share of their loan balance within the final few years of 
repayment. Consider, for example, a borrower who owes $6,000 with a 5 
percent interest rate and starts making $16,000 in annual income on the 
Revised Pay as You Earn plan. In their first few years of repayment 
they will not keep up with interest growth. If their income grows at a 
steady rate of 5 percent, they will start paying down principal in the 
sixth year of repayment and pay off their loan entirely before 
receiving forgiveness.
    Unfortunately, there is no ideal solution to the treatment of IDR 
plans in a repayment rate. Treating all borrowers in IDR as a success 
creates a good incentive for institutions to push struggling borrowers 
to sign up for these plans. While that is a good outcome for borrowers, 
it would provide a way for institutions that charge too much or produce 
insufficient return to avoid accountability under the repayment rate 
measure. On the other hand, treating all borrowers who make 
insufficient payments on IDR as a failure has its own shortcomings. 
Some unknown share of these borrowers may actually be on an income 
trajectory that eventually results in paying off their debts before 
receiving forgiveness. Labeling them a failure would be potentially 
unfair to institutions. Even an in-between solution has challenges. For 
example, the first gainful employment rule included a provision that 
allowed programs to count up to 3 percent of total loan balances using 
IDR as a success. This acknowledges some usage of IDR is acceptable, 
but excessive usage is not. But it also establishes a cliff effect 
where an institution close to the tolerance has an incentive to 
potentially counsel struggling borrowers away from IDR. It is also 
unclear how this tolerance would be applied for borrowers who are on 
IDR but are making repayment progress.
    What Congress should do: Demand more data from the Department of 
Education about the usage of IDR and how it might affect repayment 
rates. This includes data on the percent of borrowers and loan dollars 
using IDR by school or program, what percent of these individuals would 
fail or pass various repayment rate tests, and how these results vary 
based upon the measurement timeframe used.
Policy Choice #4: Should repayment rates be assessed at the program or 
                          institutional level?
    Evidence increasingly shows that on indicators like earnings, the 
results across programs within a given institution may be as great or 
greater than the differences observed across colleges. That suggests a 
program-level approach to accountability may be a more fruitful 
approach than looking only at an institution overall. It has the added 
benefit of providing additional flexibility--an institution may very 
well have exceptional and abysmal programs and a program-level approach 
potentially holds the latter accountable while leaving the former 
untouched.
    Congress must grapple with two challenges if it wants to consider 
program-level repayment rates: how to handle non-completion and whether 
there is always a meaningful distinction between programs.
                             Non-completion
    It is easy to know if a student dropped out from an institution. 
However, what program they dropped out of may not be as clear. At more 
traditional institutions that predominantly award bachelor's or 
associate's degrees, a student may not declare a major or program until 
after their first or second year. That means a student who drops out 
before that point may not actually be tracked to a given program yet. 
How these students get assigned for the purposes of repayment rate 
accountability could have significant implications for whether a 
program passes or fails.
    The challenge of dropouts not tied to programs appears to be 
particularly acute at community colleges. Approximately one-quarter of 
community college students who owed more than they originally borrowed 
within 12 years of entering school never declared a major or were not 
in a degree program. \11\ This is a smaller issue at private for-profit 
colleges, but their students still represent 10 percent of non-
repayers. How those students get distributed across programs could lead 
to unexpected passage or failure of a repayment rate.
---------------------------------------------------------------------------
    \11\  National Center for Education Statistics, ``Datalab, 
Beginning Postsecondary Students 2004-2009, Table cgabkkc5,'' available 
at https://nces.ed.gov/datalab/ (last accessed January 2018).
---------------------------------------------------------------------------
    Simply forcing institutions to assign all students to a program may 
not be a workable solution. Consider a student who indicates they wish 
to pursue a specific program, then takes four courses their first term, 
each in a different program, drops out, and does not repay. Is it fair 
to attribute the failure to that program when it could in theory be 
applied to any of the other three?
    While it is well established that outcomes vary among graduates of 
different programs, we do not know if that is also the case for 
dropouts. The table below shows the percentage of borrowers who started 
at public colleges and who either owed more than they originally 
borrowed or defaulted within 12 years of entering college. It shows 
that the results by program dropouts are relatively similar. This 
suggests that the important distinctions at the program level may be 
best considered for graduates only.

    Share of public college dropouts who owed more than 100% of their
  original balance or defaulted within 12 years of entering school, by
                                 program
 
                                        Owed Over 100
                                           percent          Defaulted
 
      Undeclared or not in a degree                44                35
                             program
                         Humanities                34                39
         Social/behavioral sciences                44                43
                                   Life sciences   38                39
       Computer/information science                31                41
Engineering/engineering technologies               41                47
                          Education                36                27
                Business/management                48                39
                             Health                36                42
               Vocational/technical                29                42
       Other technical/professional                38                45
 


      National Center for Education Statistics, ``Datalab, Beginning 
Postsecondary Students 2004-2009, Table baabknacc and baabkn1c,'' 
available at https://nces.ed.gov/datalab/ (last accessed January 2018).
    There is no clean fix for this issue. One approach could be to 
treat institutions that require program declaration upon entry 
differently from those who do not. In other words, a vocational or 
graduate institution that has little overlap across programs would use 
a program-level approach, while other schools would be judged 
institutionally. This adds complexity and could create confusion about 
who is judged in which manner.
    Alternatively, Congress could decide to run repayment tests on 
graduates at the program level and judge institutions overall on 
dropout repayment outcomes. In general, program-level accountability is 
better suited to looking at graduates because they are a more clearly 
defined group and it is more reasonable to expect that the outcomes for 
someone who finished different types of programs might vary more than 
the results for dropouts. If Congress takes this approach, it would 
need to set a higher repayment bar since graduates are more likely to 
succeed in general. This approach creates challenging accountability 
questions. How should Congress interpret an institution where its 
dropouts overall fare poorly but its graduates do well? That would lead 
into questions of not just repayment success but also acceptable 
completion rates.
    What Congress should do: Request greater data from the Department 
of Education to allow for an understanding of how repayment outcomes 
vary by completers versus non-completers and whether the Education 
Department can track non-completion by program.
                          Program distinction
    The point of program-level accountability is to assess where 
Congress believes outcomes may be so different across majors that it is 
unfair to lump results together. This approach makes a great deal of 
sense for career-focused programs that are training students to do very 
specific and disparate jobs with different salary prospects.
    It is less clear whether a program-level approach is as useful for 
undergraduate liberal arts degrees. For instance, a student receiving 
an English degree is generally considering the same range of 
occupational options as someone who majors in history or philosophy. 
Tracking all these results by program may not be particularly useful, 
and could also make it harder to assess outcomes because some programs 
have very few students.
    What Congress should do: Congress should consider whether it is 
feasible to assess results by undergraduate college instead of program, 
particularly at liberal arts institutions. This avoids making 
distinctions between, for example, history and English, but would still 
allow for separating liberal art majors from those pursuing 
engineering. Additional data from the Department of Education would 
assist in judging the feasibility of this approach as well as the 
anticipated effects. This should also consider whether graduate-level 
programs need any sort of aggregation too.
   Policy Choice #6: What should be the consequences for missing the 
                       repayment rate benchmark?
    The consequences attached to failing a repayment test matter too. 
Loss of Federal aid eligibility must be one of the options on the 
table. But it cannot be the only one. Schools are so dependent on 
Federal aid that its removal is seen as a nuclear option that is very 
tough to use. Putting all accountability emphasis only on aid loss thus 
creates a dynamic where policymakers will be reluctant to use the one 
tool at their disposal.
    What Congress should do: Consider the roles of other incentives in 
shaping an accountability system. That means considering whether there 
are performance levels that might only require disclosures of results. 
Other results may indicate the need for greater financial protection, 
such as a letter of credit or risk sharing.
    These incentives and measures also cannot operate in a vacuum. 
Congress should consider performance on multiple measures. For 
instance, poor performance on several measures might be just as 
worrying as abysmal results on a single indicator. Similarly, it should 
establish a system of bonuses that reward institutions that demonstrate 
the ability to succeed with traditionally underserved populations.
                               Conclusion
    Theoretically, repayment rates are a better measure of student loan 
success than default rates. They capture a broader range of outcomes 
and represent a higher standard for the protections we want students to 
receive. But the repayment rate is also a more complex concept that 
raises issues around students' long-term trajectories in terms of 
earnings and income.
    Unfortunately, our existing data on loan repayment provides an 
insufficient base to properly judge the effects of potential tradeoffs 
to address these issues around student movement and program 
differentiation. The good news, is the Education Department already has 
the data needed to understand these tradeoffs better. It just needs to 
better leverage its data on repayment. As a result, Congress should 
demand greater data and modeling from the Department of Education about 
the potential effects of different repayment definitions and formulas 
before enacting a particular regime into law.
                                 ______
                                 
                   [summary statement of ben miller]
    Federal student aid is a deal between taxpayers, students, and 
institutions. When students don't keep up their end of the bargain they 
face severe consequences. But there's almost no accountability when 
colleges break their promises or repeatedly fail to educate their 
students.
    The results of our current accountability system are grim, 
especially for students traditionally underserved by postsecondary 
education. We have 1 million borrowers defaulting each year and 
particularly bad results for borrowers of color.
    The existing cohort default rate is insufficient to fix our 
accountability challenges--just 10 schools risked losing Federal aid 
last year for high default rates--99.9 percent of defaulters attended 
schools that have little to fear from this measure.
    Repayment rates are potentially a stronger and more aspirational 
accountability measure. They send a message that our loan system should 
expect student success, not just avoid the worst possible outcome.
    But we still must answer key questions about repayment rates. This 
includes what constitutes successful repayment, the benchmark for 
schools, whether program-level is the right measure, and some technical 
issues around enrolling in multiple schools and income-driven 
repayment. The Department of Education has the data to answer these 
questions, but they must be released.
    Congress must also understand that repayment rates are just one 
component of making Federal accountability work. A reauthorization of 
the Higher Education Act must establish a Federal accountability system 
that aligns the interests of students, schools, and taxpayers.
    That starts with using multiple accountability measures and looking 
at results by racial, ethnic, and socioeconomic subgroups. It also 
means stronger gatekeeping to keep lousy actors out of the aid programs 
and ongoing guard rails to keep schools from breaking bad. 
Accountability must also not stop with terminating financial aid for 
the worst performers. We need incentives to boost performance of 
schools with mediocre results. And we must acknowledge the diversity of 
our higher education system and create incentives that address 
different business models and risks.
    Finally, the rest of the higher education system must step up. No 
one has kept up their end of the bargain around funding or cost 
containment. States, the Federal Government, and accreditors have 
played accountability hot potato for too long.
                                 ______
                                 
    The Chairman. Thank you, Mr. Miller. And thanks to each of 
you.
    We'll now begin a 5-minute round of questions. We'll try to 
keep the back and forth to about 5 minutes.
    We'll begin with Senator Young.
    Senator Young. I thank the Chairman and Ranking Member for 
holding this hearing to discuss accountability and taxpayer 
risk in our higher education system.
    I'll just note as I start here that I have a provision in 
the reauthorization of this Higher Education Act that we'll 
ultimately consider related to income share agreements, where 
philanthropic or private capital is used to fund degree 
programs. One would think that whoever puts that money forward 
would, of course, have a great incentive to see that that 
student completes their course of study. So it's one of many 
benefits of the income share agreement approach.
    Dr. Cruz, I understand that the City University of New York 
is on the forefront of policies focused on helping students 
complete their education and not just enroll in a program, and 
I commend the university for that. It's voluntarily investing 
in this initiative, and we have other schools that are doing it 
as well, but you're really a standout in this regard. Because 
of your institution's commitment to retention and completion, 
graduation rates have significantly improved.
    Dr. Cruz, could you share with us what best strategies 
you've learned about to keep students in school and to increase 
their likelihood of graduating, and also discuss your 
assessment of whether these strategies are scalable to other 
schools?
    Dr. Cruz. Thank you, Senator Young. All of the strategies 
are predicated on the good use of data, actionable data that 
identifies which students need which supports at what time 
during their trajectory. So, for example, understanding that 
low-income students at community colleges may not only need 
additional financial supports beyond Federal Pell Grants but 
also for Metro cards and to be able to purchase their books, 
understanding that they may need some more structure as they 
proceed through their educational journey, and providing them 
cohort-based models where they have blocks of time where they 
take their classes, all of their classes in the morning, 
afternoon, at night; and also understanding that these students 
need intrusive advising and the tools in order to be able to 
progress through their studies in a timely fashion.
    Those are some of the strategies. More generally, we see 
that we also need to take care of other aspects of the 
students? lives--counseling services, health care, child care. 
We also need to make sure that these students have access to 
what we call high-impact practices, which are practices that 
have been shown to disproportionately benefit underserved 
students--peer mentoring, supplemental instruction, 
undergraduate research.
    Senator Young. It sounds like you're talking about 
personalized services. You really need to get to know the 
circumstances, the challenges, the talents and so forth, of the 
individual student so that you can draft an individualized, a 
personalized approach to dealing with that student's 
challenges, kind of back to the basics, right?
    Dr. Cruz. That's right, and you have to structure all of 
your organizational resources toward that end.
    Senator Young. Okay. It takes leadership from the top, so I 
commend you for that. Are there particular tools that you think 
institutions need or encouragement that they should receive, 
perhaps from government, to ensure that they adopt evidence-
based policies and we increase graduation rates on the back end 
of such adoption?
    Dr. Cruz. Sure. I think that we need some minimum standards 
on what is expected for access, for completion, for time to 
degree, for loan outcomes. We need some incentive structures 
that would provide those who are willing and able to pursue 
improvement to do so; and then, of course, we need some 
strategies to be able to make sure that those that are not 
doing their part do not get access to the same resources that 
others do.
    Senator Young. Thank you.
    Mr. Delisle, thank you for being here, sir. I am aware of 
proposals for risk sharing, so-called skin-in-the-game 
proposals. Some of my colleagues have put forward different 
proposals. But it's not easy to construct a policy proposal to 
deal with making sure institutions of higher education have 
skin in the game for their students? successful outcomes. 
Questions remain regarding nuances and loopholes that could 
create perverse incentives or potentially punish certain 
institutions for outcomes that are way outside of their 
control.
    When examining policies or structures of a risk-sharing 
model, requiring colleges to pay back a statutory percentage of 
unpaid student loans sounds, at least, like a good idea, in 
theory, but there could be a variety of complicating factors. 
How can we create risk-sharing models that are fair for all 
participants?
    Mr. Delisle. Well, I think one important thing in thinking 
about a risk-sharing model is I think you'd want to pursue this 
policy as a replacement for existing accountability policies 
and not in addition to. So in terms of fairness, I think one 
thing that's fair to institutions is, as Ben Miller mentioned 
earlier, we have many of them because some of them fail in some 
circumstances, and the approach has been to sort of layer them 
on because one is failing. I think you're right, a risk-sharing 
approach is a better way to go. It's not going to be perfect, 
but I think it should be pursued as a replacement rather than 
as an additional accountability measure.
    Senator Young. Okay. I'll follow-up with you, perhaps, on 
some more specifics. My time is out.
    Thank you, Chairman.
    The Chairman. Thank you, Senator Young.
    Senator Murray has deferred to Senator Casey.
    Senator Casey. Mr. Chairman, thank you; and thank you to 
the Ranking Member as well. I want to thank her for letting me 
jump the line.
    I want to thank our witnesses today. A lot of critically 
important issues here to cover. I'll try to cover maybe two.
    The first thing I wanted to focus on--and I'll start with 
Ms. Voight--is the question of tracking outcomes. We can 
compare what happens at the elementary and secondary education 
level as opposed to the higher education. We know that, for 
example, tracking outcomes for individual groups of students, 
so-called subgroups, to ensure that schools are responsible for 
every child regardless of race or language proficiency or 
disability or income. So we've made some progress in that 
context at that level, elementary and secondary, and by 
progress I mean helping to close the achievement gap. But in 
higher education, data on graduation rates by subgroups is 
scarce, and that might be an understatement, particularly data 
with regard to students with disabilities.
    I've introduced legislation called the RISE Act, which is 
also sponsored by Senator Cassidy, Senator Hassan, and Senator 
Hatch, which would help address the issue by requiring 
institutions of higher education to both collect and report 
this data to the extent it would not reveal personally 
identifiable information. The collection would include data on 
graduation rates for students with disabilities, as well as the 
number and percentage of students with disabilities accessing 
or receiving accommodations.
    Here's the question. Is having this type of data important 
to closing the achievement gap for students in higher 
education?
    Ms. Voight. Thank you for that question and for that focus 
on the most vulnerable students who are attending higher 
education.
    Disaggregated data is absolutely essential to closing gaps 
and to ensuring that all students have an equal opportunity to 
access college and to succeed in college. We've seen that the 
graduation rate data, it's limited to first-time, full-time 
students, but it is disaggregated by race, ethnicity, and 
gender, and what that's done is uncovered many gaps in 
completion by race and ethnicity. It's really shone a light on 
some of these problems. So it's an example of how better 
information, especially when disaggregated by key demographic 
characteristics like race, ethnicity, and income status, can 
identify problems within the system and then help us to solve 
those problems through strategies like Jose has identified.
    Absolutely, we need to strive to get better information, 
more disaggregated information to answer the very challenges 
that you raised. We now have better information on completion 
for part-time and transfer students, which is a great thing, 
and CS has been able to make those changes. But those part-time 
and transfer rates are not disaggregated by student 
characteristics like race, ethnicity, or disability status, for 
example. So there's a great room for improvement to get better 
information in that way.
    Senator Casey. Thank you for that. Any other additional 
categories that would be important to helping institutions 
improve these outcomes?
    Ms. Voight. Sure. Race/ethnicity is key, as is 
socioeconomic status. Those are the two that are most often 
considered in terms of disaggregating data at the Federal 
level. Gender is a key disaggregate that is included. More and 
more we're looking for information on students who are veterans 
as well, and understanding how veterans are faring within our 
higher education system, and age is an important demographic 
characteristic as we think about serving today's student who 
often is not your traditional 18-year-old going right from high 
school into college. So that's another characteristic to keep 
in mind.
    Senator Casey. Thank you very much.
    I'm down to a minute. But, Dr. Cruz, I'd ask you as well, 
what are the strategies institutions can use to support 
students with disabilities?
    Dr. Cruz. Institutions need to create the right climate. 
They need to provide their faculty and their staff the right 
training to understand that it's beyond accommodations and 
beyond what the law requires to serve these students well, that 
it's about making sure that they have the same types of support 
to be successful to complete their degree and get a good-paying 
job to pursue further study.
    Institutions need to staff their disability offices better. 
Unfortunately, across the country we have a situation where 
these offices are overworked and rarely get a chance to go 
beyond the scheduling of accommodations and assistive devices.
    We also need to invest in innovative programs that will 
connect our student with disabilities to internships and will 
help them get a leg up if they continue to pursue work later on 
in life.
    Senator Casey. Thank you very much.
    Thank you, Mr. Chairman.
    The Chairman. Thank you, Senator Casey.
    Senator Cassidy.
    Senator Cassidy. Thank you all. I enjoyed your testimony, 
each of you, and if I had more time I would ask each of you 
questions. What I will say now will not be to challenge, will 
not be to disagree as much as to challenge and hopefully 
advance.
    Ms. Voight, first, thanks for the shout-out on the College 
Transparency Act. We have 130 different folks endorsing it, and 
it's Cassidy, Hatch, Warren and Whitehouse, and we'd welcome 
everybody else. Thank you, and we think it's a good place to 
start. Going to the student level, everything you just 
mentioned would be reported, so just to say that.
    Mr. Carnevale, if I have your last name pronounced 
correctly--it's a little bit like ``carnival.''
    Dr. Carnevale. That's what it means.
    Senator Cassidy. That's what it means.
    The old Pogo line, 'We've met the enemy, and he is us,? 
you're asking for accountability, we are asking for 
accountability from academia. I have a New Republic article 
which I'm sure pained them to write, that Rick Perry is right, 
but they were saying he was right about his proposed higher ed 
reforms in Texas. Among, I think, these reforms--and I'm 
pulling it up--was asking universities to give prospective 
students choosing college more information about class size, 
graduation rate, and earnings in the job market after 
graduation. That was one of seven, but the blowback from 
academia was intense. They quote there the American Academy of 
Universities somehow saying that they were going to punish the 
universities that complied with this. There are other factors, 
but this is one of them.
    Are we going to have severe pushback if we do the College 
Transparency Act that Ms. Voight spoke of? You're an 
academician. What is Georgetown going to say if we talk about 
earnings in the job market after graduation?
    Dr. Carnevale. Well, we've come to a point in the politics 
of this where the higher ed community has finally accepted the 
notion that they have to focus on completion. Now, the 
completion goal is very self-serving. That is, if you say that 
what we're going to do is provide money so that people complete 
college by race, gender, et cetera, what you're saying is, if 
I'm running a pizza stand, we want you to sell more full pizzas 
to people. So what we're saying is we're going to let them--the 
real issue is completion for what, and that's where you get 
pushback. That is, if you ask higher education to reach beyond 
its own interests and think about the students? interests after 
they leave, to some extent they're right, they don't have as 
much control over that. That's a more complicated outcome.
    But what we have so far is agreement, kicking and 
screaming, on the part of higher education that they're Okay 
with completion because that is a reflexive----
    Senator Cassidy. But what about earnings after graduation? 
Because Mr. Delisle's testimony says Harvard dropped a program, 
graduate study in art and theater. LSU, King Alexander, the 
President of LSU, will talk about how the post-graduation looks 
pretty good because we put a lot of engineers out there, LSU 
does, so it compares favorably. Will the universities be 
kicking and screaming to give that information?
    Dr. Carnevale. Well, in a sense, we already have it. That 
is, the Congress has dropped $780 million on state longitudinal 
data systems beginning in the Bush administration, fully funded 
in the Obama stimulus package. So in any public institution in 
any state in America, because the states did take the money, we 
now know because we can hook up wage record data from employers 
and transcript data from colleges, we know what happens to 
anybody who takes a program in a public institution, whether 
they get a job and how much----
    Senator Cassidy. But the purpose of our bill is that I 
gather that's not readily available to the graduating high 
school seniors trying to decide. Is that a fair comment?
    Dr. Carnevale. We built these information systems. They're 
largely owned by data warlords in different states. In Virginia 
you can find out what you can earn whether you get a job, no 
matter what you take, no matter where you go, in a public 
institution, but the institutions don't tell you that. It's 
that simple.
    Senator Cassidy. How do we make it better? Is it just 
passing the College Transparency Act?
    Dr. Carnevale. You make them tell the students.
    Senator Cassidy. That sounds like another----
    Dr. Carnevale. I don't know why we're keeping secrets from 
the students, but we are.
    Senator Cassidy. I agree with that.
    Mr. Delisle, one more thing. In your testimony you--one of 
the big things about all this is privacy, and in your testimony 
you spoke of taking Federal income tax data and sometimes 
working it backward. I could imagine that would be very scary 
to privacy advocates. Any thoughts on that?
    Mr. Delisle. Well, I think when you're reporting statistics 
about averages, means, percentiles, none of this is actually 
reporting information about individual students. I think the 
privacy concern--and there are also protections that you can 
take. You can suppress any information if the number of 
students leaving a particular program is small. So if it's 
fewer than 30, maybe you wait until you gather more data before 
you put that out.
    But in terms of the privacy concerns, again, we're not 
talking about releasing individually identifiable micro data. 
Everything is sort of rolled up.
    Senator Cassidy. Okay. Well, I'm out of time. I yield back. 
Thank you.
    The Chairman. Thanks, Senator Cassidy.
    Senator Murray.
    Senator Murray. Thank you.
    Dr. Cruz, thank you. Thank you to all of you for your 
testimony.
    Thank you for emphasizing the need for Federal 
accountability systems to really examine outcomes by student's 
race and income. Despite the implementation issues we've had by 
the Department of Education, I still believe that maintaining a 
focus on outcomes for student subgroups was one of the biggest 
successes of our bipartisan reauthorization of the Elementary 
and Secondary Education Act, and I agree that holding colleges 
accountable for achievement gaps is necessary and really long 
overdue in higher education.
    I wanted to ask you as a college president, can you 
describe how, if you had a better accountability system that 
put more focus on underrepresented students, it would help 
guide your institution's policies and practices to improve 
student outcomes?
    Dr. Cruz. Sure. I'm fortunate to be at an institution that 
takes very seriously its role as an engine of opportunity and 
is working hard to look at this data as we speak, with a goal 
to double the number of degrees that we produce by the year 
2030.
    But having that be sort of a mandate through an 
accountability system would only strengthen our ability to 
ensure that we're focusing on the right issues, and hopefully 
that accountability system will come with some incentives that 
will then allow us, because we are so focused on this issue, to 
get the resources we need to scale up those things that are 
really working for our students. We would, of course, hope that 
those incentives would also come with protections for other 
institutions across the country who may not be doing their part 
to move in the same direction.
    Senator Murray. Okay, thank you.
    Mr. Miller, I really appreciate your overview on how to 
improve our accountability system and your thoughts on the 
unique risks that are prevalent in the for-profit sector. Can 
you elaborate for us what some of those risks are and what 
Congress should be doing to address them?
    Mr. Miller. Absolutely. Thank you very much. I think it 
really boils down to the fact that we've seen that the Federal 
financial aid system is constructed so that for-profit colleges 
can generate large profits and large sums of money and grow 
without having to show a corresponding level of student 
outcomes. And what makes that even harder is because the 
Federal taxpayer is the one financing most of the cost of these 
places, in the wrong hands the business model becomes all about 
recruitment, not quality.
    I think what we really need here is sort of a combination 
of some things that deal with the outcomes side as well as the 
business model and financing side. I think that means both 
having stronger requirements around loan outcomes and 
completion, because one of the things we've seen here is that 
there are some places that have decent outcomes for graduates, 
but only one out of every five people is graduating.
    Then I think the second thing is I think we have to 
acknowledge that we need stronger financial accountability 
here. We need to make sure that the taxpayer is not the only 
one paying for these educations, and we also need to make sure 
that there are stronger checks to say that you don't grow 
unless you've got the outcomes to show that you really can 
sustain the student base you have.
    Senator Murray. How should Congress balance changes that 
would mitigate those unique risks posed by the for-profits 
while extending a broader accountability framework for other 
institutions of higher education?
    Mr. Miller. Absolutely. I think the first part is we really 
need to make sure we're tackling the financial incentives at 
the for-profit colleges. That to me means a private market 
test, as well as really thinking about growth strategies and 
outside ownership, because I think when you have a disconnect 
between who is running the school and who owns the school, 
that's sometimes where the financial incentives get mixed up.
    Then I think we should have a conversation about what are 
the outcomes we want from everybody, and I think that gets into 
a measure of something with loan success, a measure around 
completion, and there has to be a measure around access because 
we want to make sure that schools are taking in our students 
who are traditionally underserved and looking at that from an 
equity standpoint.
    Senator Murray. We don't want a disincentive for having----
    Mr. Miller. Absolutely. I don't think we want to create an 
incentive that has schools wanting to turn away students of 
color or low-income students.
    Senator Murray. Low-income, right. Okay.
    Mr. Delisle, I believe that a more robust Federal 
accountability system can help prevent some of the poor student 
loan repayment outcomes that you talked about. You recently 
wrote in an editorial that a strong incentives-based 
accountability system is needed to guard against the lowest-
quality colleges and programs, as well as those that are wildly 
overpriced.
    What are the three key elements of a strong incentive-based 
accountability system that would achieve those goals?
    Mr. Delisle. Well, I think one is you need to go beyond 
loans. A lot of times this conversation around accountability 
is kind of stuck around loans. I understand how it got there, 
but what I'm getting at here is there's a lot of grant aid that 
goes to these programs, and we're measuring outcomes against 
loans. So this is a principle I would put out there.
    I think the reason why in the past policymakers have chosen 
to measure loans is that they see loans as a proxy for first 
price, how much did you pay, so that's how much you borrowed, 
and then second is how much are you earning, but that's 
actually translated in the loan context through a payment. So 
how much did you borrow and how much are you paying down is 
really supposed to be measuring how much did you pay and how 
much are you earning.
    Well, I think if that's what we're after, if that's what 
Congress is after, they have the means to measure that more 
precisely than through loans, and then I think that becomes an 
easy thing to look at in grant aid as well, because there is 
almost $30 billion in grant aid being distributed with none of 
the accountability measures that apply to loans.
    Senator Murray. Okay, and I'm out of time. But, Mr. 
Chairman, I do have some testimony from Senator Durbin. He 
asked that we put it in the record, and I would ask unanimous 
consent to do that.
    The Chairman. Thank you, Senator Murray. We'll do that.
    [The prepared statement of Senator Durbin follows:]
                prepared statement of richard j. durbin
    I would like to thank Chairman Alexander and Ranking Member Murray 
for holding this hearing to focus on two very important topics that 
must be part of the Senate's debate on reauthorizing the Higher 
Education Act--accountability and taxpayer risk.
    A college education today is an important stepping stone for many 
on the path to the American Dream. We know that those with a college 
degree earn significantly more on average over the course of their 
lifetime than those without a college education.
    At the same time, students are spending more than ever before to 
obtain a degree. Cumulatively, Americans today hold more than $1.4 
trillion in student loan debt while the average student graduates with 
more than $30,000 in debt. It also means the Federal Government's 
investment in higher education continues to grow. The Department of 
Education distributes almost $130 billion per year in Federal aid to 
students.
    Unfortunately, for too many students these days, the payoff of a 
college education isn't being realized. They have to take on more debt 
than they can reasonably repay. They struggle to make their high 
monthly student loan payments, forcing them to put off buying a house, 
starting a family, and saving for retirement. They get no help from 
Department of Education-contracted student loan servicers who often do 
not provide them with information about alternative repayment options 
like income based repayment programs. They are unable to refinance 
their Federal student loans at lower interest rates or discharge their 
loans in bankruptcy. They find themselves in default with their credit 
scores ruined and debt that follows them to the grave.
    While this scenario is repeated over and over across our higher 
education system, nowhere is the problem more pronounced than with 
students who attend for-profit colleges. For-profit colleges only 
enroll 9 percent of all post-secondary students, but receive 17 percent 
of all Federal student aid and account for 35 percent of all Federal 
student loan defaults. These companies lure students with flashy 
advertising, often making false claims about their students' job and 
salary prospects. They tend to charge much higher tuition than their 
public and not-for-profit counterparts, leading students to take on 
more debt. Students who graduate from a for-profit college program 
often find that employers don't recognize their degrees. They're left 
with worthless degrees and more debt than they can ever repay.
    Over the last several years, nearly every major for-profit college 
has been the subject of multiple state and Federal investigations and 
lawsuits related to consumer fraud. Companies like Corinthian Colleges, 
Inc., ITT Tech, and Westwood Colleges closed--collapsing under the 
weight of their own wrongdoing--and left tens of thousands of students 
across the country in the lurch. The companies lured students to attend 
with false promises, pocketed billions in Federal student aid, and then 
closed--leaving students and taxpayers to pay for the mess they left 
behind.
    A Higher Education Act reauthorization must address the risk for-
profit colleges pose to students and taxpayers. For too long, weak 
accountability and poor oversight of schools and accreditors has made 
Congress and the Federal Government complicit in for-profit colleges' 
exploitation of students and bilking of taxpayers. That must change.
    We can start by reforming the accreditation process. Accrediting 
agencies, along with states and the Federal Government, form what is 
known as the Triad, which is tasked with oversight of schools. 
Accrediting agencies serve two key roles in this Triad--ensuring 
schools meet a basic level of academic quality and being the gate 
keepers of Federal financial aid.
    In practice, accrediting agencies have struggled to fulfill both of 
these roles. Too often they have failed to identify bad actors like 
Corinthian Colleges and ITT Tech, which were still accredited up to the 
moment they declared bankruptcy, and to take strong action when 
misconduct was brought to light. At the same time, the Federal 
Government, which recognizes accrediting agencies, doesn't have the 
tools it needs to ensure that these agencies are holding the schools 
they accredit accountable for their students' outcomes.
    A recent Government Accountability Office (GAO) report commissioned 
by Senator Schatz, Representative DeLauro and myself entitled ``Higher 
Education: Expert Views of U.S. Accreditation'' compiled feedback from 
accreditation experts to develop recommendations. The report highlights 
a number failings in the current accreditation system, including poor 
oversight of academic quality and lack of information sharing with the 
rest of the Triad and the public. The report also identifies a number 
of strategies to improve each of these areas. I urge the Members of 
this Committee to review this study to inform your decisions as you 
work through this reauthorization.
    Senators Elizabeth Warren, Brian Schatz, and I will soon 
reintroduce the Accreditation Reform and Enhanced Accountability Act 
(AREAA). Among other reforms, the bill eliminates the provision in 
current law which forbids the Department of Education from setting and 
enforcing student outcomes standards, makes it easier for accreditors 
to take action against schools for not meeting standards, improves 
conflict of interest protections, increases public transparency around 
the accreditation process, and gives the Department additional tools to 
ensure accreditors are aggressively overseeing schools.
    The best way to prevent students and taxpayers from another 
Corinthian or ITT Tech, is to improve oversight of schools on the front 
end by accreditors--making it less likely that predatory and poor 
performing schools are allowed to participate in Federal student aid 
program. But, no matter when misconduct occurs, schools must be 
accountable to their students.
    But a practice, used almost exclusively in higher education by for-
profit colleges, currently prevents students from holding their schools 
accountable for fraud and deception. As part of the enrollment 
agreements for-profit college students must sign, companies often bury 
mandatory arbitration clauses in the fine print. By agreeing to these 
clauses, students forfeit their right to sue the schools either as 
individuals or as part of a class. Instead, students are forced to 
resolve disputes between themselves and their school in an arbitration 
proceeding where the deck is stacked against students. Because, the 
outcome of arbitration proceedings are often secret, the practice also 
serves to hide misconduct from accreditors and regulators.
    It also means that instead of seeking financial relief directly 
from their school when misconduct occurs, students are forced to seek 
relief from taxpayers. The Higher Education Act allows students who 
have been defrauded by their schools to assert a Borrower Defense to 
Repayment, which allows them to have their Federal student loans 
discharged--ultimately putting taxpayers on the hook for the misconduct 
of schools. By allowing students to seek redress directly from schools, 
taxpayers could be saved millions of dollars.
    I, along with Senators Whitehouse, Warren, Reed, Brown, Blumenthal, 
Hirono, Markey, introduced the Court Legal Access and Student Support 
(CLASS) Act (S. 553) to end this unfair practice. This legislation 
prohibits schools that receive Title IV dollars from interfering with a 
student's ability to seek redress through the courts either as 
individuals or as part of a group. If it had been illegal for 
Corinthian Colleges to use mandatory arbitration, the government may 
not be facing the tens of thousands of Borrower Defense claims, worth 
tens of millions of dollars, that it is today as a result of 
Corinthian's predatory practices.
    In order to prevent another Corinthian disaster, we must ensure 
that schools can operate without Federal taxpayer support. Too many 
for-profit colleges rely too heavily on Federal dollars to keep their 
doors open. When the Department of Education delayed Title IV 
disbursements to Corinthian by a couple of weeks because of the 
company's misconduct, it created a cash-flow crisis for the company 
that led to its collapse. No company should be dependent on one source 
for its revenue. But current law allows for-profit colleges to receive 
up to 90 percent of their revenue from Federal taxpayers. The other 10 
percent must come from non-Federal sources like tuition payments, 
private donors, etc.
    However, a loophole in the law treats Federal education investments 
through the Department of Veterans Affairs GI Bill and Department of 
Defense Tuition Assistance (TA) program as non-Federal revenue. As a 
result, the law incentivizes for-profit educational institutions to 
aggressively recruit and target veterans, service members and their 
families. By enrolling large numbers of these students, many predatory 
for-profit colleges obtain more than 90 percent of their revenue from 
Federal taxpayers while still complying with the law.
    To better protect students and our taxpayer dollars, I introduced 
the Protecting Our Students and Taxpayers (POST) Act, which would 
change the definition of what counts as Federal revenue so that it 
includes all Federal funds like GI Bill and TA funds and reduces the 
amount of Federal revenue from 90 percent to 85 percent.
    If we are going to ensure that the investments students and 
taxpayers make in higher education pay off, we also need to give 
schools a financial stake in the success of their students. 
Unfortunately, our existing system requires schools to assume little to 
no responsibility for what happens to students after they graduate. 
Earlier this year Senators Reed, Murphy, Warren and I reintroduced the 
Protect Student Borrower's Act (S. 2028), which would create a 
graduated system of penalties for schools with high default rates or 
``risk sharing.'' By giving schools ``skin in the game'' when it comes 
to their students' success, we give them a financial incentive to do 
everything they can to ensure their students are well prepared for good 
paying jobs and the future.
    I also want to say, that if we are truly interested in 
accountability and risk to taxpayers, the Higher Education Act 
reauthorization should embrace the Gainful Employment and Borrower 
Defense rules finalized under the Obama administration. The Gainful 
Employment rule holds career education programs accountable for meeting 
their statutory requirement to prepare students for ``gainful 
employment.'' Under the rule now in effect, programs that consistently 
load students with more debt than they can reasonably repay will lose 
Federal student aid dollars. It protects students from incurring high 
debt levels for worthless degrees and protects taxpayers from wasting 
funds on poor performing programs.
    The Borrower Defense rule, finalized by the Obama administration, 
set up a more borrower-friendly process for students to submit claims 
for relief. But it also included important accountability and taxpayer 
protection mechanisms. It established triggers around which schools 
would be required to post Letters of Credit to the Department to guard 
against taxpayer losses associated with Borrower Defense claims by the 
school's students. It also, wisely, cracked down on schools' use of 
mandatory arbitration clauses in enrollment agreements--ensuring that 
schools could be held directly accountable by students.
    Unfortunately, Secretary DeVos has refused to enforce either rule--
for which she is being sued by state attorneys general and others. In 
our consideration of a Higher Education Act rewrite, Congress should 
reject the DeVos Department of Education's stance on these two 
important rules. Instead, we should do our job to legislate important 
protections for students and taxpayers included in the Obama rules.
    I thank the Ranking Member, Senator Patty Murray, for submitting 
this testimony on my behalf and I urge the Committee to take seriously 
the need to improve accountability in our higher education system to 
better protect students and taxpayers.
                                 ______
                                 
    The Chairman. But let me pick up on your question, because 
that's the same question that I've had. We've had a series of 
hearings. If we want better accountability, more effective 
accountability so that colleges have more responsibility for 
helping to make sure students don't borrow more than they can 
pay back, what, in addition to the cohort default rate, should 
we do? That's basically what Senator Murray was asking, I 
think, and you in your testimony, in your written testimony, 
said something about it. She asked you for the three most 
effective things, and is one of them that we would look at the 
rate of repayment of the loans that the students make? Continue 
your answer to Senator Murray a little bit.
    Mr. Delisle. Sure, I'd be happy to. I think that the loan 
repayment is a more comprehensive and more accurate measure of 
whether or not students are repaying their loans than default. 
As I mentioned in my testimony, the defaults are costly, 
they're $4 billion, but income-based repayment, which allows 
students to pay down their loans very slowly if their income 
relative to their debt is low enough, default rate doesn't 
capture that. So you can essentially impose costs on taxpayers 
by slowly paying down your loan using income-based repayment, 
but you're not in default.
    I think a repayment rate, which has traditionally now come 
to be defined as is the student paying down principle by some 
timeframe, I think that starts to show you the taxpayer 
interest in preventing lots of losses under income-based 
repayment, but also the interest in protecting the consumer, 
who has also essentially probably borrowed or paid too much 
relative to what they're actually earning.
    The Chairman. What about barriers to colleges that exist 
today? Are there Federal barriers that keep colleges from 
advising students how much they should borrow? Anyone have an 
answer to that? Are there laws/regulations the Federal 
Government imposes on campuses?
    Mr. Delisle. Well, it's my understanding that they--I'm not 
sure they can actually provide financial advice and counseling, 
and generally what you hear from financial aid offices is they 
tend to feel that they have to offer what the Federal 
Government says they can offer in terms of loans. I mean, these 
are entitlements. So on the one hand, the school is entitled to 
the loan as it's specified in Federal law if they meet the 
eligibility criteria.
    The Chairman. Ms. Voight, you and Dr. Carnevale were 
talking about data. One of the worries I have, I used to look 
at the Federal Government from the point of view of a Governor, 
and I also saw it when I was education secretary, and basically 
what I see is a lot of data already, just all over the place. 
And every time a new set of Members of Congress gets elected, 
they say we need more data, so we just stack it up on top of 
other data. Dr. Carnevale was saying it sounds like we have a 
lot of good data, but we're keeping it secret from students.
    My question is what would you advise us as we revisit the 
Higher Education Act, how do we do two things? One is how do we 
keep from piling requests for new data on top of data we're 
collecting which isn't as useful? And No. 2, how do we make 
sure that whatever we collect that's useful is available to 
students without micro-managing 6,000 or 7,000 campuses?
    Ms. Voight. That's a great question. You raise an important 
point because we really are in a situation where we are data 
rich but information poor. We have a lot of data, but it's 
unable to be converted into information to help students make 
the best decisions.
    The Chairman. So would you repeal a lot of laws requiring 
data, or what would you do about that?
    Ms. Voight. We need to streamline data reporting----
    The Chairman. What does that mean?
    Ms. Voight ----requirements so that the burden on 
institutions is less. Right now, an institution----
    The Chairman. Well, who would do that?
    Ms. Voight. Well, the College Transparency would do that. 
It would streamline reporting for institutions so the burden 
would be lower on them. Right now, every institution, to 
complete the IPEDS requirements, needs to run code on their 
campus to calculate those aggregate metrics. They also have to 
report data, sometimes very similar data, to the Office of 
Federal Student Aid, as well as their state data system and 
their accreditors. So the College Transparency Act would allow 
them to report in a more simple way and make it easier for them 
to focus on--use their resources on things like----
    The Chairman. I'm almost out of time. Let me ask Dr. 
Carnevale, you look at a lot of data, what's your answer to 
that?
    Dr. Carnevale. Well, I'm one-note-Johnny on this, let me 
warn you, and that is that if I'm a college student or the 
parent of one, I want to know how much it's going to cost, and 
when I graduate am I going to get a job and how much am I going 
to make and what kind of career am I looking at. And then 
either myself or maybe the government can help me, or a 
counselor can figure the cost against the return and I can 
decide what I want to do.
    The rest of it, to me, is research data. That is, we have 
plenty of data on subgroups and so on in higher education. As a 
political matter, it seems to me it's worth the trade to get 
rid of a lot of the data collection we do now and just have 
four or five things that we need, instead of adding more and 
more and more data into the equation. That's a complicated 
bargain to put on a piece of paper.
    The Chairman. Thank you very much.
    Senator Murphy.
    Senator Murphy. Thank you very much, Mr. Chairman. This has 
been fascinating and fantastic. I think this is the most 
important discussion in the context of higher education 
reauthorization, getting the accountability metrics right 
because, as has been stated, we are wasting billions of 
dollars. We are wasting billions of dollars on educations that 
never get completed. We are wasting billions of dollars on 
schools that aren't delivering outcomes. And, as we've 
discussed here, there are some pretty simple ways to maybe not 
get this perfectly right but get it a lot better than we have 
today.
    I think the reason why you hear a lot of focus on this 
question of for-profit colleges is not because we want them to 
be held to a different accountability system but because the 
development of for-profit colleges, which happened since the 
passage of the last higher education reauthorization, has made 
accountability more important. When everybody is not-for-
profit, when you are all in the business of delivering an 
education rather than trying to achieve the highest return for 
your shareholders, accountability isn't as important. It's not 
that it isn't important, but when you insert into higher 
education a motivation to deliver return for shareholders, then 
all of a sudden you see the results we have today where 10 
percent of students are going to for-profit schools but 25 
percent of all Federal aid is going to for-profit schools and 
30 percent of all defaults are happening at for-profit schools. 
It begs us to be more concerned about this accountability 
question.
    I have two questions. Dr. Cruz, I want to ask you this 
question in the context of your testimony that any Federal 
accountability system has to be tailored to account for 
differences in institutional missions, and that really is the 
difference between a for-profit and a non-profit. The mission 
is different.
    How do you tailor an accountability system to account for 
those differences in institutional missions between for-profits 
and not-for-profits?
    Dr. Cruz. I think in the non-profits and the publics we 
know what that would look like, which is the discussion we're 
having about integrating equity metrics into our systems, 
having better data, and ensuring that the campuses have the 
right incentives to look at that data and implement the best 
practices we all know about in order to better serve their 
students.
    In the for-profit sector, of course, the incentives are 
different, and the accountability structure is as well, not 
just from the Federal Government's perspective but also from a 
state perspective and an accreditation perspective. So I would 
look at the need to better understand what are the incentives 
and unintended consequences, or perverse incentives for that 
matter, that get in the way of for-profit institutions 
investing more of their earnings toward student success rather 
than profit. That's the lens we should have when we look at 
accountability for them.
    Senator Murphy. Mr. Delisle, I wanted to followup on this 
fascinating conversation you were having with the Chair and 
Ranking Member as they were continuing to press you on 
measurements other than student loan rates that you would 
recommend going to an accountability system. I'm intrigued by 
that notion, but I don't think you ever got to the set of 
indicators outside of student loan performance that you would 
recommend be part of an accountability measurement. We sort of 
shifted from student loan default to student loan repayment, 
but we're still on student loans.
    You were suggesting that there's more relevant data that 
gets more finely to the point of performance and outcomes than 
just student loan data, so let me just press you once again on 
that, because I think that's a really important conversation. 
What else would you recommend we look at in an accountability 
system outside of the entire subject of student loans?
    Mr. Delisle. Well, first let me say, picking up on this 
other conversation here, that I think that if you have a 
student-based outcome measure that you were interested in terms 
of accountability, you can apply it to different kinds of 
institutions with different missions because you just care 
about the objective outcome of the students, right? So I don't 
think that's preventing you in any way from applying it to 
different institutions.
    But in terms of other accountability measures, in terms of 
the Pell Grant program, you could look at how much do students 
earn who get the Pell Grant, even though they don't take out 
loans, or perhaps the institution doesn't take out loans at 
all. Here again, you probably want to look at earnings, are 
students earning more than a minimum wage, on average, or a 
certain cut. I think we can debate the details of where the cut 
points are, but the Pell Grant program is a big investment.
    Some people say, well, we don't need to worry about 
accountability for students because they don't have to pay that 
back, but they do get a limited amount of Pell Grants, and so 
they're using up their limited amount of aid by spending time 
at a school that may not be paying off, and they're also 
spending an awful lot of time. So I think we owe it to them in 
that regard to attach accountability to grants as well as 
loans.
    Senator Murphy. Thank you, Mr. Chairman.
    The Chairman. Thanks, Senator Murphy.
    Senator Hassan.
    Senator Hassan. Well, thank you very much, Mr. Chairman, 
and thank you to all the witnesses for being here today.
    Mr. Miller, I wanted to start with a question for you. The 
Higher Education Act requires a college to be approved by a 
combination of oversight bodies, the state Department of 
Education-approved accreditation body and the Federal 
Government, to receive Federal financial aid. While this 
approach creates a system with checks and balances, it can also 
open the door to parts of the triad not fulfilling their role 
as intended by the Higher Education Act.
    In your testimony you say that states, the Federal 
Government, and accreditors have played accountability hot 
potato for too long. You mention that this has led to many 
states and accrediting agencies to not provide enough 
oversight, which allowed predatory for-profits like Corinthian 
Colleges and ITT Technical Institute, to take advantage of 
students.
    Can you explain how in your research states and accrediting 
agencies have struggled to hold colleges accountable? In 
particular, how do you think states can improve how they work 
with the Federal Government and approved accreditors to better 
examine student outcomes and ongoing guardrails to fulfill 
their role as a key part of the program integrity triad?
    Mr. Miller. Absolutely. Very briefly, just to start with 
accreditors, one of the things we saw there was that the extent 
to which they were really considering outcomes was not as 
strong as it could have been, and that often the orientation 
was far more toward saying we'll give you another year to 
improve rather than saying, you know, at some point there's 
enough smoke here, we think there's a fire, and enough is 
enough.
    On the state side, I think we have a couple of issues. One 
is the amount of state capacity for oversight of its schools is 
not particularly high. But I think the thing we could at least 
start to expect is states being greater overseers of their own 
money. So, for example, in California, the Cal Grant program 
has its own default rate and graduation rate requirements 
attached to it. You could see other states start to do that 
with their financial aid money.
    The other part is I think states need to make authorization 
a more meaningful thing. In some places it's not much more than 
a business license and a few hundred dollars, and if that's a 
path that's going to end ultimately with Federal aid money and 
billions of taxpayer resources, it should be a higher bar than 
that.
    Senator Hassan. Well, thank you, I appreciate that.
    Dr. Carnevale, there's been a lot of conversation during 
this reauthorization process about moving from an 
accountability system focused on institution-level 
accountability to one focused on program-level accountability. 
While having access to transparent program-level measures is 
valuable, especially for prospective students, we've seen time 
and again what happens to student outcomes when institutions 
are not held to a high standard.
    I have concerns that if we narrow our accountability 
metrics to only look at program-level outcomes, we'll let 
institutions off the hook. It's the institution's leadership, 
the president, senior administrators, and governing board, that 
determine what programs are offered and how the college manages 
the marketing and recruitment of its students.
    What do you think we would lose if we switched from 
institution-level accountability to program-level 
accountability? Do you think there's a way to use both 
approaches to best serve students?
    Dr. Carnevale. I think in many cases you want to do both. 
You want to do suspenders and a belt in many cases, institution 
and program. But if we're ever going to crack the black box of 
higher education financing and cost, which is the primary 
public issue, I think we're going to have to change the terms 
of competition. If we change the terms of competition to the 
program level, we'll draw in more providers. We should be 
neutral with respect to providers, for-profit or not. We will 
then, at the same time, set up a situation where every college 
doesn't have to have every program, the cafeteria style. You 
can have a college that has one. You set up a whole new 
competitive environment when you go to the program level, and 
you can then track that, incidentally, once you get to the 
program. You can track it to occupations.
    The institution, I think, is really an artifact of our 
history. I think in many respects it's passe. We're now in an 
era in learning where the micro-economics of learning are 
really what matter. We'll never crack the code in financing in 
higher ed unless we get below the institutional level.
    Senator Hassan. I do understand that. I think the concern 
is, though, that it is still, within institutions, it is the 
institutional leadership that make decisions based on what's 
happening with the program, and I think there is some concern 
that if you insulate the programs too much in terms of 
accountability, or perhaps the way lawyers think about it, 
liability, you don't have the institutional leadership really 
looking at that level of service and results that we want from 
all of our programs. Is that a concern?
    Dr. Carnevale. Frankly, I don't think so. I think 
institutional leaders--higher education is a business, has a 
business model, and the business model we're running now at the 
institutional level is incredibly inefficient, in large part 
because it doesn't operate at the program level. It's a package 
of goods, some consumed, some of investment value.
    Incidentally, Georgetown won't go away. That is where I am. 
In the end, if you get a Bachelor's degree with 40 percent in a 
field of study and 60 percent in general education, we know 
over the longer term that has more economic value. So when you 
look at the program data, that will show up. So I think 
institutional leaders, they have budgets and boards, and in the 
end we should drive higher education through those mechanisms.
    Senator Hassan. Thank you very much.
    And thank you for your indulgence, Mr. Chairman.
    The Chairman. Thank you, Senator Hassan.
    Senator Smith.
    Senator Smith. Thank you very much, Mr. Chairman and 
Ranking Member, and to our testifiers today. It was very 
interesting.
    I'd like to go to something that you said, Mr. Miller. You 
said how student aid is a deal between students and taxpayers 
and institutions, and that really makes a lot of sense to me. I 
think about this in terms of a situation we had in Minnesota in 
September 2016. Hennepin County District Court ruled that two 
for-profit institutions, Globe University and Minnesota School 
of Business, violated laws around consumer fraud and deceptive 
trade practices. Then, of course, their licenses were revoked, 
and months after that they lost their accreditation and could 
no longer receive financial aid dollars.
    Here is clearly a situation where the deal didn't work for 
students and taxpayers. Of course, these students lost not only 
their money, but so much of it is their time.
    As we are working to rewrite the Higher Education Act here, 
I also understand that the Department of Education is going 
through a rulemaking process around this issue of gainful 
employment. Could you just talk a little bit about this, how 
you see that, and what legislative changes you think we ought 
to be making as we look at this whole issue?
    Mr. Miller. Absolutely, Senator. One thing I would just 
note very briefly is part of what happened with those two 
schools you mentioned was a failure of their accreditation 
agency to oversee what was happening there properly. The 
Department of Education in 2016 rightfully removed that 
accreditor's ability to access Federal financial aid. Now this 
Department of Education is trying to let them back in later 
this year, which I think is concerning.
    I think part of it, again, gets back to this issue around 
the business model and the recruitment strategies, and that's 
where we really see a lot of the problems arise, and that's 
where part of it is I think the Department of Education, as 
well as states and accreditors, need to be doing a better job 
looking at what the marketing materials actually say, what are 
the promises made to students, and how are those things 
conveyed.
    We talk a lot about secret shopping on the servicing side 
of loans. We don't really talk about it at all on the actual 
education side of things.
    I also think we probably need to do a better job getting 
money before things go out of business, because what we've seen 
is the instant the Department of Education levies a massive 
fine, the school will immediately close up shop, leaving 
students and taxpayers holding the bag. We should be much more 
aggressive in demanding letters of credit from schools up 
front, and we should also probably consider whether it's worth 
having a Federal tuition recovery fund. Many states have this 
in place where basically you can at least get your money back, 
but we don't have one at the Federal level. So it becomes 
basically who is going to take the loss, the student who has 
paid or the taxpayer who has paid, and we should really try to 
get the money from the school first.
    Senator Smith. Thank you. You said that part of the failure 
with Globe and Minnesota School of Business was the failure of 
the accreditation agency. So what is the rationale for having 
this accreditation agency kind of come back into the fold?
    Mr. Miller. I'm really not sure. I think part of it is that 
they are trying to claim that they are a new actor and they've 
changed their ways, but it's only been about 2 years, which is 
not very much time. It takes time to rewrite standards.
    It's not just about saying you're going to be a good actor 
on paper but walking the walk and talking the talk. I am not 
clear that there's really been enough time to show that their 
act has really changed and they've gotten better.
    Senator Smith. Thank you.
    Let me just go back to this question that Senator Hassan 
was probing on, which is the relative importance of looking at 
program accountability versus institutional accountability. I'd 
be very interested to hear what others on the panel think about 
this and how we balance these, so really anybody can chime in.
    Ms. Voight. Sure. So, especially when thinking about 
transparency for students, they need information at the program 
level to make decisions. Students are sometimes choosing 
between multiple institutions, but sometimes they're only 
choosing between programs within an institution. So they need 
that information especially on things like workforce outcomes 
that are closely tied to the program that a student is enrolled 
in.
    At the same time, the institutions often are the locus of 
control for making policy decisions that impact all programs 
across the institution. So there's a role to play, like Dr. 
Carnevale said, for both program-and institutional-level data, 
transparency and accountability here. Leadership really 
matters, and that leadership often is at the institution level.
    Senator Smith. Great. Thank you.
    Anybody else want to comment on that in just a few seconds?
    Mr. Miller. I think there are two other issues at the 
program level. One is we need to keep the overall institutional 
finances in mind, and the second thing is we know outcomes vary 
by graduates of programs. We don't know if they vary by 
dropouts. So one of the things you see is, for example, about a 
quarter of community college students who do not reduce their 
loan balance never declared a program. So where do they fit 
within a program accountability structure?
    Senator Smith. Great. Thank you very much, Mr. Chair.
    The Chairman. Thank you very much.
    Senator Warren.
    Senator Warren. Mr. Chair, if it's all right with you, I'll 
yield to Senator Kaine.
    The Chairman. It's all right with me if it's all right with 
Senator Kaine.
    Senator Kaine. I very much appreciate that, Senator Warren, 
and to the Chair and Ranking.
    The Chairman. Senator Kaine.
    Senator Kaine. Thanks for this great hearing, and thanks 
for all of your testimony. My colleagues have asked most of the 
questions that I was interested in, but there's one particular 
thing I'll focus on, and that is military families and 
veterans.
    I'm on the Armed Services Committee. I'm the father of a 
Marine. With Senator Burr, I'm the chair of the Military Family 
Caucus here in the Senate.
    There was a letter that was sent to the Ranking and Chair 
in both Houses in February from a group of military, military 
family, veteran organizations. I'm just going to read the first 
two paragraphs of the letter, and then I'll ask that it go into 
the record.
        ``Dear Chairmen and Rankings, on behalf of national 
        organizations representing our Nation's military 
        service members, veterans, survivors, and military 
        families, we write to urge you to ensure that important 
        laws and regulations protecting students are not 
        watered down or eliminated. We hope that bipartisan 
        agreement is possible in order to protect America's 
        military heroes and their families.''
        Next paragraph: ``As you may know, veterans, service 
        members, survivors and military families are too often 
        singled out and targeted with the most deceptive and 
        fraudulent college recruiting. A loophole in the Higher 
        Education Act's 90/10 rule has the unfortunate effect 
        of incentivizing proprietary colleges to view veterans, 
        service members, survivors and military families as 
        nothing more than dollar signs in uniforms, and to use 
        aggressive marketing to draw them, as Holly Petraeus, 
        the former head of the Service Members Affairs at the 
        U.S. Consumer Financial Protection Bureau, explained. 
        This is because the U.S. caps the Federal funds 
        proprietary schools can receive but fails to list funds 
        from the Departments of Defense and VA, and many 
        proprietary colleges target DOD and VA funds to offset 
        the cap on Federal funds. As a result, our Nation's 
        heroes are targeted with the most deceptive and 
        aggressive recruiting. Thus, it is critical to fully 
        uphold the existing protections that help stop these 
        abuses.''
    I'd like to introduce that for the record if I might, Mr. 
Chair.
    The Chairman. Thank you. It will be.
    [The following information can be found on page 75 in 
Additional Material:]
    Senator Kaine. My question to each of you--and, Ms. Voight, 
you talked about veterans as sort of being a group that we're 
now paying some attention to as a subgroup, and in an important 
way I see this in all my colleges. As we're grappling with the 
Higher Education Act, talk a little bit about things like the 
90/10 rule and potential reforms to it, or gainful employment. 
You were responding to Senator Smith generally about that 
topic, what we ought to be sensitive to so that we can protect 
the military, military families and veterans from being 
targeted with deceptive practices. And I direct that to anyone.
    Mr. Miller, you look like you want to jump in.
    Mr. Miller. Sure. So, first of all, Senator Kaine, as you 
mentioned in that letter, we absolutely have to close the 
loophole in the 90/10 rule. We don't want to create a situation 
where essentially veterans are multipliers for financial aid.
    The second is I think we need to be doing a better job 
looking at the actual outcomes achieved of veterans and holding 
schools accountable for not serving them well. So right now we 
don't have as much reporting on that as we should.
    The third thing is we talk a lot about accountability to 
help protect them, and we don't talk enough about what do we do 
to help a veteran student if they are stuck in a school that is 
not using their time well, that is not giving them a good 
education. I think part of that is we don't want them to lose 
their housing benefits if a school closes right away, and we 
also want to make sure that we have plans in place to help them 
with credit transfer and to really guide them so they don't 
suddenly find themselves stuck having invested large periods of 
time with no help.
    Senator Kaine. You respond talking about veterans, and this 
is more broadly veterans/military families/active duty who 
receive a tuition assistance benefit because they're active-
duty status. This affects an awful lot of people, and I see all 
of them on my campuses in Virginia.
    Are there others who would like to address the topic? Yes, 
Dr. Carnevale.
    Dr. Carnevale. Myself, my two brothers, my father and my 
uncle all went to college on veterans benefits. I never knew--
the check just came, which I think is the problem now, because 
there's an issue about how the veterans are using that money. I 
remember this all began with the for-profit schools dust-up 
over on the House side when I was involved some, and what stuns 
me is that we still don't know how veterans use their benefits. 
We don't know what majors they're in, what programs they go to, 
what the benefit is relative to the--that is, we don't collect 
basic gainful employment data on veterans.
    Part of that is--because I've been in conversation with the 
VA and DOD and others about this--is that they're worried that 
it won't be flattering. I think they're wrong. I think it will 
be flattering, at least from what I know about veterans and 
their tendency to pick fields of study that have an earnings 
return. I think the VA will come off very well. But that simple 
step of stop just sending the checks and ask somebody to find 
out what they're doing with those checks, whether they're in 
programs that help, whether they're getting decent counseling--
I don't think they are--that, to me, is the answer here.
    The for-profit school thing is, to some extent on this 
issue, a bit of a red herring. We don't know how they do in the 
other schools, either.
    Senator Kaine. Mr. Chair, thank you. I'm going to yield 
back to my colleague, and I'm going to ask a similar question 
QFR for those who couldn't respond. I'd love your ideas to help 
us as we work on HEA.
    Thank you, Senator Warren.
    The Chairman. Thank you, Senator Kaine.
    Senator Warren.
    Senator Warren. Thank you, Mr. Chairman.
    There seems to be a difference of opinion about whether we 
should have an accountability system that treats for-profit 
colleges differently from other colleges and universities, so I 
just want to jump straight into that discussion.
    Mr. Miller, which colleges are driven by the personal 
financial interests of private investors rather than 
accountability to state taxpayers or volunteer boards of 
trustees?
    Mr. Miller. For-profit colleges, Senator Warren.
    Senator Warren. For-profit colleges. And which colleges 
have to demonstrate quarterly profit growth to please Wall 
Street shareholders?
    Mr. Miller. Those would be publicly traded for-profit 
colleges.
    Senator Warren. And which colleges usually spend far more 
money on marketing and advertising than they spend on actually 
teaching anything?
    Mr. Miller. Those are also in the for-profit sector.
    Senator Warren. And which colleges enroll less than 10 
percent of all students but are responsible for nearly 30 
percent of all student loan defaults?
    Mr. Miller. That's the for-profit college sector.
    Senator Warren. And which colleges are more often 
investigated or sued by state and Federal authorities for 
defrauding students?
    Mr. Miller. Those are also for-profit colleges.
    Senator Warren. And which colleges are the only schools 
that force their students to sign away their legal rights 
through arbitration agreements?
    Mr. Miller. Those are also in the for-profit sector.
    Senator Warren. And which colleges are responsible for 98.6 
percent of all fraud claims from defrauded students?
    Mr. Miller. For-profit colleges, as well.
    Senator Warren. So two of the largest college collapses in 
the history of American higher education occurred recently when 
Corinthian and ITT imploded, ruining the lives of hundreds of 
thousands of students. What kinds of schools were those?
    Mr. Miller. They were for-profit colleges, Senator Warren.
    Senator Warren. Mr. Miller, are for-profit colleges 
different, and should the Federal Government have rules that 
acknowledge that difference?
    Mr. Miller. I believe they are, Senator Warren. I mean, I 
believe we've seen that we have a financial aid system now that 
allows for profit without showing high-quality student outcomes 
as well, and that the business model in the wrong hands becomes 
too much about recruitment and not quality.
    Senator Warren. Well, thank you. You know, investors in 
for-profit colleges often focus on boosting their profits by 
squeezing every possible dime out of students and out of 
taxpayers by any means necessary, even if it sometimes means 
breaking the law. For-profit colleges are different, and when 
the Federal Government pours billions of dollars into these 
colleges, we should put some restrictions on the money that 
recognize those differences.
    History shows us that for-profit colleges need heightened 
accountability, but I think there is a much larger problem 
here, and that is all colleges pretty much that access the 
Federal dollars, no matter the quality of the education that 
they provide, and no matter how high tuition rises, and no 
matter how hard it is for students to repay their loans, we 
have built a system where everyone but the wealthiest students 
need a Federal grant or a Federal loan in order to afford 
college, and then the Federal Government and the accreditors 
put their rubber stamp of approval on these schools, and 
students reasonably conclude that those schools will pay off 
for them because we have vouched for them.
    Mr. Delisle, I know you're concerned about accountability 
for the taxpayer, but isn't the best way to protect the 
interests of the taxpayer to stop rubber stamping bad schools 
and funneling Federal dollars into them in the first place so 
that students can get cheated by them?
    Mr. Delisle. Well, I mean, I think you're right in terms of 
some of the gatekeeping role that accreditors have played and 
state authorization. I mean, clearly, it hasn't prevented a lot 
of problems and a lot of bad outcomes. I think that--but I also 
think that if you have a sort of student outcome in mind that 
you think is acceptable and a student outcome in mind that you 
think is bad and unacceptable, I think that standard can apply 
to institutions regardless of how much money they're getting 
and regardless of their tax status or whether or not they have 
private investors.
    Senator Warren. I'd be fine with that if the schools were 
the same. But I think, as the list of questions I went through 
with Mr. Miller show, we know where the principal problem is, 
and we need to focus on that principal problem. It's hurting a 
lot of students.
    I think part of what we're talking about here is about 
incentives, and I think that most schools are acting rationally 
within the terrible system of incentives that we've set up. 
Now, I believe that we should have some risk sharing and some 
accreditation reform legislation to realign our incentives. We 
have made terrible choices in this country, to rely on student 
debt as the way that most students have access to higher 
education, and it has really thrown our thinking about 
accountability out of whack.
    Instead of asking whether or not students are leaving 
college ready to focus on successful lives that aren't 
dominated by monthly debt, we focused almost exclusively in 
terms of accountability on whether students literally can pay 
the bare minimum to repay their debts to the Federal 
Government. I don't see how we can reauthorize this law without 
fixing both the college accountability problem and the 
structural student loan debt problem that's behind this entire 
business.
    Thank you, Mr. Chairman.
    The Chairman. Thank you, Senator Warren.
    Senator Murray, do you have any----
    Senator Murray. I don't have any additional questions; I 
will submit some for the record. But I just want to thank all 
of you for being here. I think this has been a very productive 
session. Accountability is obviously important, but it seems to 
me a one-size-fits-all for 7,000 different colleges is not one 
that's going to work. And as Senator Warren just talked about, 
the bad actors, we need to think about that and how we make 
sure that we look at how we do accountability in the right way.
    But this has been a very productive hearing, and again I 
want to thank all of our witnesses. Mr. Chairman, thank you for 
holding this hearing.
    The Chairman. Well, thank you, Senator Murray. This has 
been a good hearing. It's another where we try to have 
bipartisan hearings in the sense that we agree on the witnesses 
so we get different points of view.
    I would encourage each of you, if you have additional 
thoughts--remember, we're going to be writing a bill in the 
next few weeks, and if you have specific--I mean, I would 
invite you to put yourselves in our shoes and say if I were 
Senator Alexander or Senator Murray, I'd write it this way. If 
you want to send us two, three, four pages, that could be very 
helpful to us and to our staff as we work together to do that.
    Listening to Senator Warren's comments, I just can't help 
but ask Dr. Carnevale, I know Dr. DeGioia at Georgetown 
University is a very successful president. Dr. Carnevale, what 
if he announced to his board he intended to operate Georgetown 
University at a loss for the next 10 years? What do you suppose 
would happen?
    Dr. Carnevale. I suppose he would--he's one of the longest 
tenured presidents, and that would end.
    The Chairman. So I gather you think that relying on the 
outcome of different universities, different kinds of campuses 
is more important than looking at whether they're for-profit or 
public or private----
    Dr. Carnevale. I think the for-profit schools have 
performed--I've been the expert witness who shut down 45 of 
them. But I think the for-profit schools have performed an 
admirable function in the United States because they're like 
the German and the Japanese in the 1970's and ?80's when we 
started to fail in manufacturing. That is, they've raised all 
these issues. Their behavior resulted in gainful employment on 
the table. I agree with them that what's good for the goose is 
good for the gander. If we set standards and they don't make 
them, then they shouldn't get Title 4 money. But that should 
also be true for the rest of the higher education system.
    The Chairman. Thank you.
    I think Senator Murray's question earlier was the one we're 
really trying to focus on today, in addition to cohort default 
rate, what you would be looking at, and you've given us some 
good answers about that. And in terms of data, which is another 
way of accountability, how do we make sure we're getting the 
right data without just imposing multitudes of new requirements 
for data for researchers that students never see or never use. 
I think that's part of our challenge.
    The hearing record will remain open for 10 business days. 
Members may submit additional information and questions to our 
witnesses for the record within that time, if they would like.
    The next meeting of the full Committee will be on Tuesday, 
February 6th at 10 a.m. on reauthorizing the Higher Education 
Act, improving college affordability.
    Thank you for being here today.
    The Committee will stand adjourned.

                          ADDITIONAL MATERIAL

                                                  February 2, 2017.
Hon. Lamar Alexander,
U.S. Senate Committee on Health, Education, Labor, & Pensions.
Hon.Virginia Foxx,
House Committee on Education & the Workforce,
U.S. House of Representatives.
Hon. Patty Murray,
U.S. Senate Committee on Health, Education, Labor, & Pensions.
Hon. Bobby Scott,
House Committee on Education & the Workforce,
U.S. House of Representatives.
    Dear Chairmen Alexander and Foxx, and Ranking Members Murray and 
Scott:
    On behalf of national organizations representing our Nation's 
military servicemembers, veterans, survivors, and military families, we 
write to urge you to ensure that important laws and regulations 
protecting students are not watered down or eliminated. We hope that 
bipartisan agreement is possible in order to protect America's military 
heroes and their families.
    As you may know, veterans, servicemembers, survivors, and military 
family members are too often singled out and targeted with the most 
deceptive, fraudulent college recruiting. A loophole in the Higher 
Education Act's ``90/10 rule'' has the unfortunate effect of 
incentivizing proprietary colleges to view veterans, servicemembers, 
survivors, and military families as ``nothing more than dollar signs in 
uniform, and to use aggressive marketing to draw them,'' as Holly 
Petreaus, the former head of Service Member Affairs at the U.S. 
Consumer Financial Protection Bureau, explained. \1\ This is because 
the loophole caps the Federal funds proprietary schools can receive, 
but fails to list funds from the Departments of Defense (DOD) and 
Veterans Affairs (VA), and many proprietary colleges target DOD and VA 
funds to offset the cap on Federal funds. As a result, our Nation's 
heroes are targeted with the most deceptive and aggressive recruiting. 
Thus, it is critical to fully uphold the existing protections that help 
stop these abuses.
---------------------------------------------------------------------------
    \1\  Hollister K. Petraeus, ``For-Profit Colleges, Vulnerable 
G.I.'s'', New York Times (Sept. 21, 2011)
---------------------------------------------------------------------------
    We hope you will stand with America's heroes by opposing any 
efforts to weaken or eliminate existing protections for student 
veterans and their families, including:
      The Gainful Employment Rule, which enforces the Higher 
Education Act's requirement that career education programs receiving 
Federal student aid must ``prepare students for gainful employment in a 
recognized occupation.'' This common-sense requirement applies to 
career education programs at all types of colleges (public, nonprofit, 
and proprietary) and protects both students and taxpayers from waste, 
fraud, and abuse. Veterans express anger when they discover that the 
government knew that a career education program had a lousy record but 
allowed them to waste their time and GI Bill benefits enrolled in it. 
The Gainful Employment Rule requires schools to disclose basic 
information about program costs and outcomes and prevents funding for 
programs that consistently leave students with debts they cannot repay. 
Because the rule eliminates funding for wasteful programs, the 
Congressional Budget Office estimates that repealing the rule would 
increase spending by $1.3 billion over 10 years. \2\
---------------------------------------------------------------------------
    \2\  CBO preliminary estimate prohibits the Department of Education 
from implementing any rulemaking relating to ``gainful employment'' and 
from making any future rules related to ``gainful employment,'' July 7, 
2016. Estimate includes both mandatory and discretionary spending.
---------------------------------------------------------------------------
      New regulations on Federal student loan relief for 
defrauded borrowers and college accountability, which make it harder 
for schools to hide fraud and clarify avenues for students to receive 
the loan relief they are entitled to under the Higher Education Act. 
America's heroes are targeted for such fraud because of the 90/10 
loophole, and deserve the relief they are entitled to under the law.
      The ban on incentive compensation (sales commissions) in 
the Higher Education Act, which was enacted more than 20 years ago with 
broad bipartisan support to reduce high-pressure, deceptive sales 
tactics. Sales commissions incentivize college recruiters to ``do 
anything and say anything'' to get veterans to enroll. Veterans, who 
are frequently encouraged to enroll on the spot, are particularly 
vulnerable to high-pressure recruiting: over 60 percent are the first 
in their family to attend college. In 2015, the Education Department's 
Inspector General called for greater oversight and enforcement of the 
ban to prevent fraud and abuse. We urge you to oppose the creation of 
any loopholes in the ban.
      The Enforcement Unit at the Education Department, which 
is taking steps to protect all students--but has explicitly embraced a 
goal of prioritizing veterans and servicemembers--from any illegal 
conduct by any college.
    We would be grateful for the opportunity to discuss these concerns 
with your staff. Thank you for your time and attention.
            Sincerely,
                                                Carl Blake,
                                      Associate Executive Director,
                                     Paralyzed Veterans of America.
                                            Bonnie Carroll,
                                             President and Founder,
                          Tragedy Assistance Program for Survivors.
                                           Joseph Chenelly,
                                                Executive Director,
                                      AMVETS National Headquarters.
                                            Anthony Hardie,
                                                          Director,
                                         Veterans for Common Sense.
                                                 Anna Ivey,
                                                        Co-Founder,
                                                 Service to School.
                                     Mary M. Keller, Ed.D.,
                             President and Chief Executive Officer,
                                Military Child Education Coalition.
                                       Peter James Kiernan,
                                                         President,
                                       Ivy League Veterans Council.
               Michael S. Linnington, LTG (ret), U.S. Army,
                                           Chief Executive Officer,
                                           Wounded Warrior Project.
                                                Jared Lyon,
                                                   President & CEO,
                                       Student Veterans of America.
                                       Jeffrey E. Phillips,
                                                Executive Director,
                 Reserve Officers Association of the United States.
                                              Joyce Raezer,
                                                Executive Director,
                              National Military Family Association.
                                    Randy Reid, USCG (ret),
                                                Executive Director,
      U.S. Coast Guard Chief Petty Officers Association & Enlisted 
                                                       Association.
                                        Kathy Roth-Douquet,
                                                               CEO,
                                                Blue Star Families.
                                                John Rowan,
                                                National President,
                                       Vietnam Veterans of America.
                                         Mark C. Stevenson,
                                           Chief Operating Officer,
                                   Air Force Sergeants Association.
                                            Carrie Wofford,
                                                         President,
                                        Veterans Education Success.
                                 ______
                                 
    [Whereupon, at 12 p.m., the hearing was adjourned.]

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